The Poisoned Chalice of Debt.

The article titled "The Poisoned Chalice of Debt" explores the impact of sovereign borrowing on emerging market and developing economies. The analysis suggests that contrary to the intended effect, sovereign borrowing may leave citizens worse off by increasing volatility and lowering investment. The article presents two perspectives: the neoclassical paradigm, which predicts that borrowing should lead to faster growth and less volatile spending, and an alternative perspective that suggests governments borrow due to present bias, leading to excess borrowing and crowding out private investment. The data indicate that countries with external public savings experienced faster growth, while those that borrowed stagnated. The article concludes that sovereign borrowing generates volatility and is a drag on growth, rather than a means to tap into global savings for investment. The value of sovereign debt markets to borrowing countries is ambiguous, and caution should be exercised in facilitating borrowing in developing and emerging markets. [Extracted from the article]

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