Panagiotis Pegkas This study empirically investigates the relationship between economic growth and several factors investment, private and government consumption, trade openness, population growth and government debt in Greece, where imbalances persist several years after the financial crisis.
In summary, in addition to the effects on savings, spending, investment and monetary system, foreign debt has far reaching effects on the financial system. Therefore they will be forced to reduce the demand for goods and services causing serious recession.
Even if a country does not default in its payments, the interest on debt service is too high to absorb their export earnings. Another effect of debt is the fact that it restricts freedom of action when income decreases and debt servicing needs much of the income which is left. Brazil, Korea, Columbia and Mexico are on the top.
Mexico and Brazil were among the countries that had serious problems in their debt paying obligations, but in recent years both countries improved a lot. In surpluses were enough to meet the interest payments. Following are some of the policy solutions which can help in reducing the debt problem.
Elimination of Federal Budget Deficits: Therefore, if a government really wants to halt the high growth of debt, the first step is to eliminate the budget deficits.
This can be done by reduction in spending. Here the question arises that how to distribute the cut in spending between the various components: In this regard the best cut would be the cut in government expenditures on non-productive projects.
Because the cut in consumption will indirectly kill the incentives to invest. The cut in investment has a multiplier effect that translates into a reduction in output, income, and hence private spending. In other words, it needs to generate a trade surplus. Because the new investment will crate or save enough foreign exchange to make the future payment without creating the additional tax burden on the community.
Revision of the Tax Policies: Such policies should be eliminated. Reversal of Capital Flight: Reversing these capital flights would make it almost possible to pay off the external debt. Positive real stable interest rates will help a lot in this regard. Need for International Cooperation and Coordination: They should borrow according to their needs and on low interest rates.
This debt then is presented to the debtor nation federal bank for redemption at par into their currency units at a premium prevailing in the free market.
That amount is then spent on purchasing some assets being liquidated by the public sector. When the accounts are done, the external debt is reduced. It may be an extraordinary expensive way to clean up the balance sheet. But it will promote foreign investment, both direct and portfolio investment.
Major reasons for this debt crisis were the rise in oil prices inandhigher interest rates ofand declining exports due to world recession of Reversing the capital flights would make it almost possible to pay off the external debt.
Positive real stable interest rates will also help a lot in this regard. Developed countries of the world can play a key role in the developing countries.
The problem is still here yet not so worse.the impact of external debt on economic growth: a comparative study of nigeria and south africa Folorunso S.
Ayadi University of Lagos Felix O. Ayadi Texas Southern University Abstract This paper investigates the impact of the huge external debt, with its servicing requirements, on economic growth of the Nigerian and South African rutadeltambor.com://rutadeltambor.com · They find that the average impact of debt only becomes negative at debt ratios above percent of exports or 40 percent of gross domestic - product, and that the marginal impact of debt starts becoming negative at about half of rutadeltambor.com · The study investigated the impact of external debt on economic growth in Nigeria for the External debt is a major source of public receipts and financing capital accumulation in It is widely recognized in the international community that excessive foreign rutadeltambor.com debt and rutadeltambor.com · Abstract The impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in ’rutadeltambor.com the impact of external debt on economic growth of Sudan from a period spanning – The study showed that export earnings have a significant positive impact while external debt and inflation had negative impact onrutadeltambor.com · Effect of External Debt on Economic Growth and Development of Nigeria AJAYI, LAWRENCE BOBOYE.
(Ph.D) What are the effect of external debt on economic growth of Nigeria i.e. impact of the huge, debt service relationship between foreign debt service and GDP growth after excluding exports revenue growth for Africa andrutadeltambor.com