Burden of National or Public Debt

The extent of the burden of national or public debt is determined by the type of debt whether external or internal, the purpose for which the debt was used and the period of repayment.

national-debt

Unlike external debts, the burden of internal debt tends to be minimally felt. This is as a result of the fact that payment of interests and repayment of internal debts come from the tax revenue of which the debt holders contributed proportion of the revenue.

However, such transfer of payment or income may increase inequality in the country but there is no way the whole economy of the country will be affected. Therefore, apart from the changes of distribution of income, saddling future generations with more financial responsibilities etc, which internal debts may cause, there is really no major serious economic burden the debts will cause to the whole economy of the country.

On the other hand, in the case of external debts, the burden is directly felt on the economy though the purpose for which such debts is used will either lessen such burden or exacerbate it. The balance of payments of a country is overburdened as a result of payment of interest and repayment of external debts to foreign countries, especially external Dead-weight debts.

Since foreign currencies are involved in external debts servicing, export surplus will have to be created and the country’s importation ability will be weakened. Also, another direct real burden of external debts is that servicing of such debts will amount to real deduction from the country’s national product. The management of external debts through the adoption of articulate monetary and fiscal policies will however reduce the burden of such debts.

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Maduawuchi

I am Maduawuchi, the Editor of Nigerian Infopedia. I am a Biochemist, I love God, I love my family and I love my life. Writing is natural to me that's why I love what I do... Captain, Leader, Motivator, Brother and Friend. Saved by Grace alone.

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