- Unsustainable public debt means the debt burden is too large to manage.
- It can lead to higher interest payments, consuming a large part of revenue.
- This reduces funds available for productive investments (e.g., infrastructure, social sectors).
- It can lead to a “debt overhang,” discouraging further borrowing and investment.
- It can impact a country’s credit rating, making future borrowing more expensive.
- Ultimately, it can hinder long-term economic growth.