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. (15 marks)

Answer 1

ANSWER :

Summarized the information provided in the question: Public debt arises as a result of financing- - - - -

JUSTIFYING THE POSITION BY COMING OUT WITH ALL THE RELEVANT ARGUMENTS FOR AND AGAINST YOUR DECISION:

Fiscal policy is the policy made by the government for to achieve various objective like reducing inequalities of income and wealth in the country, reducing poverty, public welfare programmed, for more and more investment, reducing unemployment for this. Three tools used under the fiscal policy namely;

# Public revenue or taxation

# Public debt

# Public expenditure

There are basically, two types of public debt- Internal debt (IF DEBT TAKEN within the country) and External debt (if debt taken from the outside the country)

Argument For Public Debt:

# Public debt gives boost to the economy

#It help to reduce the unemployment problem by investing

#Public debt is utilize for the development of infrastructure than gives developed economy and also raise the level of the economy

# If public debt utilizes in the fruitful way, than income of the people increases, which also help to raise the level of per capita income and also national income

#It help to bridge the financial gap of the government

#Proper utilization of the public help to raise economic growth of the country.

#It also help to accomplish government social goals and development goals

#Proper utilization of the public debt used long term growth and prosperity of the economy

Argument Against Public Debt:

# If public debt is not proper utilized than it creates burden on the economy

# It is also argument that there is no economic advantage but only political benefit

# Impact on the other country image is badly affected as if country is not paying the debt in time or become unpaid

# It leads to future cost to the country, as additional burden

# It also impact the goodwill of the country if debt taken from the outside country.

# Out of the internal debt and external debt , external debt is more serious impact compared to the internal debt

Note :

Public debt is good or bad is both depends on the situation whether it is utilized for the positive way or in the negative way. it creates employment, reduce poverty, and other social parameters than it is good otherwise it become worse for the country and difficulty to pay and creates burden to the country.

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