Debt Trap, Debt Burden Shifting, and Welfare Loss

Countries in debt trap face a high level of debt servicing payments that compels policy makers to shift resources from development to debt servicing sector thus indicates a unique debt burden shifting leading to welfare loss of the citizens. This book represents the limited attempts to model debt trap by operationalizing it through the basic borrowing fundamentals. It provides insights into how to avoid debt trap and to identify good debt management practices that would eventually lead the country to better development. A group of fourteen Asian Pacific Developing Countries were selected for this purpose under the panel data approach. Findings show that the debt trap countries exhibit an explosive growth trend in external debt that tempts policy makers to shift the debt burden by diverting borrowing funds towards unproductive means, and this ultimately affects the nation's well being. Non debt trap countries followed basic borrowing fundamentals closely and utilized the borrowing funds prudently and appropriately channeled for development purposes.