Outline for short coming of a country borrowing heavily from internal and external source ?

Answer 1

I. Introduction
- Definition of borrowing heavily from internal and external sources
- Importance of borrowing for countries' development
- Overview of the shortcoming of excessive borrowing

II. Negative impact on the economy
A. Internal borrowing
1. Increased interest payments
- Diversion of funds from productive investments to debt servicing
- Higher interest rates to attract internal lenders
2. Crowding out private sector
- Limited availability of funds for businesses and individuals
- Reduced investments and economic growth
3. Inflationary pressures
- Excessive money supply to finance borrowing
- Increased prices and reduced purchasing power

B. External borrowing
1. Dependency on foreign lenders
- Limited control over economic policies and decision-making
- Vulnerability to changes in global financial conditions
2. Foreign exchange risk
- Exposure to fluctuations in exchange rates
- Difficulty in debt repayment with currency devaluation
3. Debt crisis and default risk
- Overburdened with debt payments
- Potential for default and negative credit rating impact

III. Socio-political consequences
A. Internal borrowing
1. Income inequality
- Limited government spending on social welfare programs
- Unequal distribution of resources
2. Political instability
- Public dissatisfaction with increased taxes and reduced public services
- Social unrest and political backlash

B. External borrowing
1. Sovereignty concerns
- Risk of compromising national interests to satisfy lenders' demands
- Possibility of becoming a debtor nation
2. Dependency on foreign aid
- Reduced autonomy in policy-making
- Tied aid conditions can hinder development and lead to reliance on external assistance

IV. Long-term consequences
A. Debt trap
1. Reduced investment in future growth
- Limited fiscal space for infrastructure development and human capital investments
- Decreased competitiveness in the global market
2. Generational burden
- Transfer of debt to future generations
- Strained economic prospects for younger population

V. Conclusion
- Recap of the shortcoming of excessive borrowing from internal and external sources
- Importance of sustainable borrowing practices for long-term economic stability
- Need for balanced fiscal policies, diversification of revenue sources, and debt management strategies.