(Answered) If a country borrows heavily from abroad while at the same time running a trade deficit, it may be…

➤ Why can a trade deficit coexist with sustainable external debt?
Because a trade deficit can reflect investment in productive capacity that raises future output and export potential. If borrowed funds finance infrastructure, education, or technology, growth can outpace debt service. A deficit financed by long-term, stable capital inflows supports transition to a higher-income path. Policy credibility and sound macro management help ensure this outcome.