Acknowledgement

External Debt

The level of external public debt may have nonlinear effects on the rate of economic growth. As a result, a rise in the percentage of foreign public debt to GDP at low levels of indebtedness may be beneficial to economic growth; yet, at high levels of indebtedness, an increase in this proportion may be detrimental to economic development. The theory of economic growth, which incorporates some contributions from international finance, explores the link between foreign debt and economic development. As a result, Krugman (1989) depicts the debt relief Laffer curve (which has the form of an inverted U), which depicts the relationship between a country's nominal debt and its real projected payment. Due to a low risk of default, debt and projected payments both grow on the upward segment of the curve; on the descending section of the curve, the quantity of debt increases, but expected payments begin to decline due to a high probability of default. The author comes to the conclusion that when a nation is located on the declining part of the curve, it is suffering from debt overhang. External debt obligations operate as a levy on investment when there is a significant amount of debt outstanding. While Keynes himself expressed concern about the rising level of public debt, a subsequent generation of Keynesians attempted to demonstrate the opposite. For example, Abba P. Lerner remarked in 1943 that since governments normally have the authority to choose tax rates and create money, the magnitude of the government borrowing in absolute or relative terms is irrelevant (because of transfer back to nation from taxpayers to bondholders). Therefore, the authorities should do everything possible to keep the national income level at full capacity and full employment, excluding certain inflation, and without regard for the existence of budget deficits or the extent of the budget deficit. Another optimistic Keynesian - Evsey D. Domar - demonstrated mathematically in his 1944 work "The Burden of Debt and National Income" that under certain circumstances, public debt may expand indefinitely while the percentage of taxes necessary to finance it can stay constant. Thus, the author argues that as long as the economy continues to develop at a sustainable rate, deficit financing is unnecessary. Because of the crowding-out effect, monetarist economists were opposed to Keynesians in supporting budget deficits to jump-start a stagnant economy. In the literature on public debt and growth, this term was widely employed. There is an increased demand for loans when there is surplus borrowing in the market to fund government budget deficits, but there is no change in the supply. As a result, interest rates increase in an attempt to counteract a scarcity of credit, which in turn lowers private sector investment and growth. Keynesians, on the other hand, believe that if an economy has considerable resources that are not being utilized and is not performing to its full potential, financing with deficits will draw these resources back into the economic system. The interest rate does not change as a result of this increase in the availability of loanable funds (Bilan, 2016).