The Dynamic Interrelationship between Defense Expenditure and Debt in Sri Lanka (original) (raw)

2012

Abstract

There has been much concern in the relevant literature about the possible destructive economic effects of large military expenditures. It is supported by academics and scholars that defense expenditure can significantly affect a country’s economic growth and in some cases it influences external and internal debt. However, relevant empirical studies have produced contradictory evidence while the literature in this field remains relatively poor. Since independence, Sri Lanka has taken several steps to build up its economy in a successful way. At the same time, the country suffered nearly three decades of civil war and heavier defense burden during this time. Military expenditure was very low before the 1980s, but since then a need for foreign borrowing and external debt accumulation grew. Therefore, there should be a possibility relation between the deficits and foreign borrowing in Sri Lanka.

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