Advantages/Merits of government borrowing
- To fill the foreign exchange gap. Public borrowing especially external debts are important in supplementing foreign exchange earnings of a country
- To fill domestic savings gap. Public borrowing supplements domestic savings that can be low
- To curb inflation; borrowing from internal sources reduces money from the circulation leading to fall in aggregate demand
- To save people from unforeseen calamities/crisis such as floods and land slides
- It allows governments to spend more on public services and projects than they raise in taxes so as to improve standards of living.
- It helps the government to cover budgetary deficits.
- It promotes national savings as citizens buy government bonds.
- It provides citizens the chance to earn interest.
- To get funds to pay off a previous loan or debt servicing
- To stabilize the balance of payment position by investing the borrowed funds in export oriented industries and production for domestic consumption to reduce the amount of imports.
- To finance important but expensive projects such as dams and roads
- Improves international relationships
- It helps avoid depleting locally-available loans for private investment
CATEGORIES Economics
TAGS Dr. Bbosa Science
