A dollar-denominated debt is one measured in dollars. For instance, when the US borrows money it sells bonds with values listed in dollars. The US then pays bondholders interest (and eventually the principal) in dollars. It may seem perfectly ordinary for a country to borrow in its own currency, but many developing countries have unstable currencies, so must borrow in foreign currencies. When a country must borrow in a currency it does not control, it is potentially vulnerable to defaulting on its debt if its economy weakens and the government is unable to trade domestic currency for the currency it needs to service its debts. In 2001, Argentina faced a debt default for these reasons, demonstrating the need for a country to hold foreign exchange reserves to ensure that it will be able to service its debt.