Let's assume that a country has a GDP growth rate of approximately 1% per year (the number is not important). Then the government of such a country can theoretically roll its current debt and even contract new debt and keep the same ratio debt/GDP. Advantages of rolling the debt are easily understandable: you never pay back the principal, only the interests, and can invest money on constructing new infrastructures, or maintenance for the already constructed infrastructures. Conversely, I would like to know

What are the disadvantages of rolling the debt? In which case the advantages of rolling are greater than paying?

So to make it clear (see comments below), I am not talking about political reasons, but purely economical reasons.

  • 1
    $\begingroup$ @1mufflon1 Well, I know that these are political reasons. However, there should exist some economic reasons for it. At least some advantages that I cannot see and maybe you do. $\endgroup$ Feb 14 '21 at 19:38
  • $\begingroup$ @1muflon1 I edited the question, I am now dealing only with economics reasons for and against rolling the debt $\endgroup$ Feb 15 '21 at 12:10
  • $\begingroup$ This question is much better, I retracted my previous comments $\endgroup$
    – 1muflon1
    Feb 15 '21 at 12:19
  • $\begingroup$ (1) Technically: countries almost always “roll debt.” Debt rolling is the replacement of matured bonds/bills with new ones. (2) The other issue is that every country has its own debt management strategy. Typically a budget will indicate the long-term plan for debt levels. Since countries cannot completely control revenue nor expenditures, those plans might be viewed as aspirations, and realised outcomes can differ. You need to look at the actual plan and judged what happened. $\endgroup$ Feb 15 '21 at 12:55

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.