Problems of an external debt
- Encourage over dependence
- It has high administrative costs
- Worsen the country’s BOP position
- Limited capital accumulation due to reduced expenditure on capital goods.
- Affects the level of consumption due to high taxation.
- Reduces the volume of imports into the country
- External debts can be inflationary.
- It often leads to a vicious cycle of debt for countries. The debt cycle refers to the cycle of continuous borrowing, accumulating payment burden, and eventual default.
CATEGORIES Economics
TAGS Dr. Bbosa Science
