Acknowledgement

Debt Service

Excessive public debt payment expenses in developing and emerging countries have been highlighted by the reappearance of the global financial crisis of 2007 (International Monetary Fund "IMF," 2018). According to the International Monetary Fund (IMF), increased global interest rates might shift significant budget resources to debt servicing from crucial growth-enhancing infrastructure and social services, putting low-income and developing nations at risk. Due to increasing interest rates and lower expected growth in most developing and emerging economies, debtor governments will find it more difficult to renew their bonds and contractual loans (IMF, 2018) Economic development in the twentieth century has been hampered by the Classical school's assertions that public debt repayments, most of which originate in the United States, prevent prospective foreign investors from investing in the country (Krugman, 1988; Diamond, 1965; Modigliani, 1961). Deficit overhang may be comparable to an implicit tax on domestic revenues to cover the deficit, which discourages investment, according to Krugman and Sachs (1989). Sachs (1989) found that impoverished nations with high levels of public debt dedicate a large share of their essential foreign currency reserves to debt payment commitments. As a result, the funding of economic and socially beneficial activities is constrained, which has a multiplier impact on the economy (Sachs, 1989). In the opinion of Krugman (1988) and Serven (1997), both high levels of public debt and sudden shifts in domestic and foreign government indebtedness lead to resource misallocation and inefficiency, as well as economic uncertainty, because the government may adopt distortive measures to finance debt repayments, causing economic growth to slacken. As a result of the economic uncertainty, prospective investors will either refrain from investing because they want to wait or would engage in capital flight because they want to avoid the possibility of a tax hike (Serven, 1997). Individuals' lifetime accumulated consumption and household savings patterns, as well as gross capital stock forming, according to Diamond (1965), will be adversely affected by the different variants in tax rates required to finance the interest payments on both domestic and foreign public debt, according to Diamond (1965). Predictions by the private sector of distortive levies to pay government debts would discourage new and existing private investment, resulting in a slowdown in economic development (Agenor and Montiel, 1996). Taxes paid in future years for debt payment represent a transfer of buying power from one generation to another, with the economy suffering the burden of a reduction in total gross capital creation, according to Buchanan (1964).