For sure, the debt has likely an impact to the economy. It was just because that money is poured directly into the economy activities. Once the debt was disbursed, the demand of goods and services would increase and more jobs would be created. But unfortunately, the debt-caused economic growth has nothing to do with the goal of the project.
And sometimes the government has no vision on the project goal and the holistic grasp on the connections between projects and its priority. For instance community-based water supply and sanitation project was wrong in terms of priority. Everything starts from prosperity, and others will follow. It is just to make people rich first and naturally they can afford to buy water supply from private company and adequate sanitation equipment. Doing the reverse will result in endless circle, the poverty lead to the worse water supply and sanitation and the government’s aid – not the water supply and sanitation facilities from the debt – will be sustainable. Consider, the debt was earmarked for supporting private sector to build industry and the income of poor people raised, and then invite the private investor to provide water supply.
Peter Drucker said:” developing nations don't need government-to-government aid or grandiose World Bank projects but, instead, partnerships with private enterprises in industrial nations.” I absolutely agree with this Guru of Management Gurus. The right usage of debt is to support business by developing industrial zones, constructing the best roads, bridges, ports and airports, providing the easiest and friendly regulation, and last but not least, training officers to serve the investors all across the world. It is investors creating money for our people. Unless we find oil reserves as much as in Saudi Arabia, then it is the only way to enhance public incomes.
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