Abstract

The impact of government debt on economic growth has continued to generate series of debates among scholars around the world. Some scholars conclude that an increase in public debt caused by an expansion of government expenditure promotes growth, while some scholars had a different view and instead assert that higher public debt may slow down overall performance of any economy. In recent years, there has been an increased concern on whether countries can imperil their growth prospects by having too much debt. An example is the debt crisis of Greece in 2015, which started in 2008 and has raised concerns for many economists and policymakers. Greece has been bailed out twice since 2010 by the International Monetary Fund (IMF), European Central Bank and the European Commission with a total of €240 billion. Despite the bail out, the country still has a huge outstanding debt unwilling to be expanded by its creditors, with unemployment above 25%. This is because the bailout fund goes towards paying off debt rather than being pumped into the economy to engender growth. The focus of this chapter is the impact of public borrowings with attention to governance on economic performance.

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