A debt crisis occurs when a country or organization cannot meet its debt obligations, leading to a default or restructuring of loans. This situation often arises from excessive borrowing, economic downturns, or poor financial management, resulting in a loss of investor confidence and increased borrowing costs. During a debt crisis, governments may implement austerity measures, cutting public spending to manage their finances. This can lead to social unrest and economic hardship for citizens. International organizations like the International Monetary Fund (IMF) may step in to provide financial assistance, often requiring reforms in exchange for support.