Negative effects/disadvantages/demerits of public borrowing
- It encourages dependency / laziness.
- Undermines capital formation due to debt repayment
- It is inflationary i.e. a case with external borrowing
- Worsens the Balance of Payment (B.0.P) position
- Shifts the burden of debt repayment to the future generation who may not have benefited from the debt but pay it.
- Worsens income inequality
- Leads to manipulation of the country by foreigners
- Leads to misallocation of resources / extravagance /corruption
- Citizens are being burdened by taxes to raise revenue for debt repayment.
- External debt payment limits import capacity
- Undermines private investment due to public borrowing outcompeting private investment in both the money and capital markets
- Nationals are denied essential goods due to debt repayment.
CATEGORIES Economics
TAGS Dr. Bbosa Science
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