8 Reasons Why Government Borrow Money

8 Reasons Why Government Borrow Money are listed and explained in this article. We hope you find it informative and helpful for your research.

Why Do Governments Borrow Money Instead of Printing It

Reasons Why Government Borrow Money

Reasons Why Government Borrow
Reasons Why Government Borrow – Photo Source: https://www.nysenate.gov

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The leadership of a country is synonymous with the management of any other organization, sometimes, situations arise where the leadership needs to borrow monies to fund projects and activities for the betterment of the people living in that country, not for personal use.

One may think, “With the available resources and monies in a country, does the government still really have to borrow?”

Reasons Why Government Borrow Money:

1. To finance a budget deficit

Most times, when a budget is presented and approved, there are some deficits owning to the fact that the total amount of cash made available to fund the budget out of the country’s treasury or revenue is not enough to carry on with the funding of the budget, in such cases the government of the country will have no other option than to borrow from sister countries or any other source to meet up with the budget.

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2. To finance huge capital projects

It is a common tradition that in developing countries, some huge projects are often carried out and in order for these projects to be carried out successfully and due to the insufficient funds available to the government, the government will have to borrow.

3. To meet the cost of national emergencies

Sometimes, events happen which are never planned for, these events do not leave the countries better than it was met. Some of these terrible events include war, famine, natural disasters, etc.

In order to meet the needs of unforeseen situations, the government needs to embark on borrowing so as to enable it to meet the cost of national emergencies.

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4. To reduce the economic burden on taxpayers

The revenues that the government gets are based upon the taxpayers’ money as such, in a bid to reduce the burden of the taxpayers, the government usually decides to go ahead to borrow a reasonable amount of money in order to execute some proposed projects.

5. To meet the balance of payment balances

Sometimes, the government of a country can decide to borrow money in order to enable it to correct or execute a balance of payment deficit. This is more or less like the case of robbing Peter to pay Paul.

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6. To provide employment opportunities

One of the goals of any Government is to create job opportunities for its citizens and this sometimes becomes a reason why the government needs to borrow; in order to establish some kind of projects which are capable of generating gainful employment opportunities for the people of that country.

7. To service some loans

Sometimes, a smaller loan is taken just to further enhance the repayment of bigger loans by the government and this loan is sometimes gotten either from internal or external sources.

8. To control Fluctuations in the income of the nation

A downfall in the anticipated income may lead to a government borrowing money in order to meet up the funds that are required to finance its big projects.

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If everyone in the country pays their tax, it would be better and ease the burden of the government as well as permanently destroy the idea of getting loans by the government to fund projects which will be to the ultimate benefit of the general population because to start with, getting these loans to have a kind of negative effect on the value of the currency of the nation.

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