Question

QUESTION 3
Public debt arises as a result of financing successive budget deficits through borrowing. The public debt stock as at March 2020 stood at GHC 236.1 billion according to the Bank of Ghana. There have been arguments for and against borrowing by government and the opposition all these years depending on where they find themselves.
As a student of Public Finance, is borrowing good or bad? Justify your position by coming out with all the relevant arguments for and against your decision.

Answer 1

Q: Public debt in country of ghana creates budget deficit according to that how far this debt or borrowing good or bad?

Ans:

Public debt is the concept used in Public finance which is borrowing money by Government of any country and it owes to outsiders. It is used for raising fund to pay some payments for services by any country's government.

The deadline for public debt is when the amount of borrowing or debt reaches 77% of GDP of that country , it tends to slow the growth.

Public debt is good for short run purposes, to get additional funds to use them for economic growth. it seems to be favourable for foreigners to invest their money in country's growth through buying government bonds, which is a safer way of investment.

It is safer than foreign direct investment. it also improves people standard of living, economic expansion work happenn for country.

Public debt will be not goodsign when debt becomes very high that country seems to be unsafe to pay additional burden to investers.

When debt reaches critical level, investors demands more interest rate from country.

GDP of country hampered as it has to pay higher interest to investers.with higher critical level bond rating show down in rating agencies.

It creates high burden for country. Debt crisis chance of happening for country.

So in my opinion the public debt should be large enough to satisfy the investers and in that propertionate it should be small enough to keep regular debt interest low.