The Values and Dangers of Sovereign Debt for Social

Welfare
General will is the basis of democracy that can be understood as a
consensus of peoples interest in terms of social welfare which is the
major backbone upon which the whole physical structure of a
democracy stands. A Government before deciding its policies should
keep in mind that the policies which they are forming have to be in
consonance with the peoples will. Every policy, be it social, or
economical, domestic or international are all ultimately the
manifestation of the peoples will and thus the charioteers of social
welfare of a country. They have to ensure the maximum possible
benefit of the society.
However in this era of globalization the independent and autonomous
functioning of a country is a myth. The policies and strategies of a
country for social welfare are decided not only by the will of its
inhabitants but also by the global inclination of the world economy. The
times of wars by means of arms and ammunition are long gone.
Todays world witnesses the era of economic warfare. To destroy a
country you dont need weapons. All you need is the control over the
countrys economy. Economic sanctions have replaced arms and
ammunitions. Thus it can be very evidently said that the sovereignty of
the nations, i.e., the power of a nation to form its policies of
governance or any other policies according to its will unaffected by any
external force, is waning in the modern times. Countries across the
globe, no longer act autonomously in their policy-making and are
affected by the global economic scenario.
One such evil arising out of this global economic era is Sovereign
Debt. Sovereign Debt is the amount of money a country owes to the
holders of its government bonds. In simple terms it is the money or
credit that a government owes to its creditors. Mostly they are in the
form of securities and bonds. Sovereign Debt in itself carries a
potential to either accelerate or decelerate an economy. Sovereign
Debt puts the economy of a country in such situations where it has to
take certain substantial measures like setting the right incentives for
the policy makers by containing moral hazard, clarifying the burden
sharing between domestic actors and international lenders, and
ensuring efficient risk pricing through predictability in the restructuring
of claims.
Thus, sovereign debt is becoming a great menace in the world
economy for it affects the policy-making process of a country by
imposing several unwanted complications pressurizing them in molding

the framework of their policies as according to the lender institutions

and countries. It is an unfortunate reality that sovereign debt has an
effectual weightage on the sovereignty of any country and acts as a
negotiable instrument over the debtor country which creditor
institutions and countries handle.
The influential role of USA as a driver of the policies of countries like
Pakistan is a great example of the impediments that sovereign debt
lays upon the debtor countries. Burdened by the debts received from
USA, Pakistans policy-making process is affected to a very large extent
by the will of the Federal Government.
In a roundabout way the debt act as a negotiable external force, which
encroaches upon the sovereignty and somehow even has a political
influence in the governance of a country. The case of India during the
1990s is an ideal example of the situation where the bailout offered by
an international institution forced the country in bringing substantial
reforms in its economy. The noose around Indias neck is tightened by
the practices and policies emanating from the temple of global
capitalism, the World Bank. The conditions and changes after LPG
policies proved so. For being rescued from an economy failure, India
had to heed to all the conditions that the World Bank put forth.
A related development is of collapsed and collapsing states,
characterized by the breakdown of public institution and of the
governance, law, and order. To be effective, interventions should and
probably will be multifunctional. Such interventions will be costly.