Human Existence Facing Challenges due to Debt-bound Existence
Debt dependency, a growing concern in contemporary society, particularly in low- and middle-income countries (LMICs) and developing nations, significantly impacts economic stability, social structures, and health outcomes.
Economic Stability
High public debt increases financial vulnerability, making refinancing government debt more difficult and costly when coupled with rising interest rates and slow economic growth. This can lead to financial instability and economic slowdown. When countries cannot service foreign debt, it can result in economic crises, as seen in Sri Lanka’s 2022 default following a loss of foreign-exchange reserves exacerbated by the COVID-19 pandemic and fiscal mismanagement [2]. Even advanced economies like the US face rising debt burdens and fiscal pressures, posing systemic risks to global fiscal sustainability and growth [3].
Social Structures
Debt crises can cause socioeconomic and political turmoil, leading to sharp economic downturns and widespread social unrest, as seen in Sri Lanka post-default [2]. Long-term development is undermined as debt servicing diverts resources from public investments in education, infrastructure, and social programs, perpetuating inequality and hindering poverty reduction, especially in developing countries already challenged by historical structural inequalities and limited fiscal space [4].
Health Outcomes
High debt service obligations limit government spending on health infrastructure and services, weakening health systems. The economic crises triggered by debt defaults exacerbate poverty and reduce access to nutrition, clean water, and health care, leading to worse health outcomes overall [2][4]. Additionally, pandemic and global geopolitical shocks increase borrowing costs and inflation, straining already limited resources in LMICs, amplifying vulnerabilities across populations [4].
A summary of key impacts is presented in the table below:
| Dimension | Debt Dependency Effects | Examples & Context | |-------------------|-------------------------------------------------------------|---------------------------------------| | Economic Stability| Increased refinancing risk, financial sector vulnerabilities, slower growth, currency shocks | Sri Lanka’s debt default (2022), US rising deficits | | Social Structures | Socioeconomic unrest, hindered development, inequality | Sri Lankan civil unrest post-default | | Health Outcomes | Limited funding for health, worsening public health crises | LMICs facing pandemic recovery struggles |
While the relationship between debt dependency and negative outcomes is clear in many contexts, outcomes vary based on institutional strength, monetary policy independence, and the local economic structure [1]. Advanced economies possess some safeguards that mitigate these risks, unlike many LMICs [1][4].
To address these challenges, strategies such as financial education and literacy can be implemented at both individual and systemic levels. This includes limiting predatory lending practices, encouraging cooperative businesses, implementing debt relief programs, and prioritising funding for education, healthcare, and job training programs that enhance economic mobility and reduce reliance on debt. Additionally, responsible lending practices among financial institutions, education about the importance of maintaining emergency savings, utilising technology for personalised financial advice, and establishing local support groups for financial planning and mutual aid during times of need can help mitigate the impact of debt dependency.
- In the realm of personal-finance, financial education and literacy initiatives can empower individuals to make informed decisions and avoid predatory lending practices that contribute to debt dependency.
- The promotion of cooperative businesses and debt relief programs at the systemic level can help reduce the burden of debt dependency on businesses and governments, thereby promoting economic stability.
- With a focus on healthcare and health-and-wellness, ensuring adequate funding for health infrastructure and services is crucial for maintaining strong health systems, which indirectly combats the effects of debt dependency on health outcomes.
- Investments in education, infrastructure, and social programs, like job training programs, can help improve economic mobility and reduce reliance on debt in developing countries.
- Leveraging social media and entertainment platforms for financial literacy campaigns and local support groups can help raise awareness about responsible personal-finance practices and mutual aid during times of financial distress, mitigating the impact of debt dependency on individuals and communities.
