Per FinTechExplained, currency devaluation doesn't just affect the government — it has real-life impacts on citizens, too. People may gather at banks to try and withdraw all their money, causing a banking crisis. As The Balance reports, this has lasting impacts: public debt can accelerate by two-thirds in the years following a banking crisis.
Unlike when an individual person defaults on debts and can have their property repossessed, that won't happen to a country (via FinTechExplained). But not paying back a loan can sour relationships between the two countries, which can lead to increased tensions and even military action.
One of the most lasting impacts on the country is that its name can be tarnished, and other countries might avoid lending to it in the future. The United States has a good track record of repaying international loans and has never defaulted on its debts, so it is considered a reliable country to provide a loan at low-interest rates (via Management Study Guide). But countries that have a smaller GDP or less government stability do tend to default on their loans, and over time, this can erode trust and make other countries less likely to give them another loan in the future. And there are other consequences, too.
