One may liken a debt trap to quicksand.

They both experience the same outcome: no matter what you

do, you get trapped more and more. Quicksand will gradually engulf anyone who remains motionless in
it. On the other hand, if they make an independent attempt to flee, they will pass out instantly from
exhaustion. Aggregate demand, salaries, profits, and taxes will stagnate while the deficit and debt
increase if all economic agents become fixated on paying off their obligations at the same time. On the
other hand, if they attempt to advance by continuing or increasing their current spending, they risk
being penalized by an expensive risk-premium. When agents must refinance their debt at an ever-rising
interest rate, a debt trap turns deadly. This chapter examines the debt trap that a few developed
nations fell into and the challenges they faced in getting out of it. Our research is influenced by the
postKeynesian paradigm developed by Kalecki and Keynes in the 1930s, whose core principles are the
effective demand principle and the non-neutrality of money and finance (Kalecki, 1971; Keynes, 1936).
This chapter is divided into four sections, each of which takes a distinct methodological approach to the
credit boom and the debt trap. In the summary provided in the next part, we compare the sustainable
wage-led expansion that marked the golden age of capitalism (1945–1970) to the unsustainable credit-
led growth that characterizes the contemporary capitalism (1996-2008). We provide some empirical
evidence about the debt trap and credit expansion in Spain and other selected nations at the conclusion
of this section. The post-Keynesian model is used to support our assertions in the third part. It is helpful
to examine the relationship between the four factors that contribute to a debt trap: the pace of increase
in demand and output, asset prices (especially during real estate bubbles), the interest rate, and the
ratio of debt to income. The addition of a multiplier whose value is based on the debt load is one of the
novelties. The evolution of debt ratios is tracked in the fourth part under several scenarios that mimic
what occurred in some advanced economies during and after the 2007–2008 financial crisis. The
chapter's last section draws the conclusion that economies in debt traps, like humans trapped in
quicksand, require an outside rescuer whose first objective should be to lessen the debt load.

Today, the issue of debt trap is becoming a very relevant and dated topic and issue, and has been a
worry of most of the western media. During president Duterte’s term, the Philippines distanced himself,
and our country from the west, or to the country’s “longest ally”, the United States of America and
made a closer ties with China and Russia. For all of Duterte’s 6 year term, he has borrowed a lot of
money in order to provide fund to its Build! Build! Build! (BBB) program which is the centerpiece
program of the Duterte administration that aims to usher the “Golden age of infrastructure” in the
Philippines. The Duterte administration has borrowed $1.1 billion from China thus far.The Duterte
administration also obtained loans from China for the construction of the Chico River pump irrigation
system operated by the National Irrigation Administration (NIA);the New Centennial Water Source,
Kaliwa Dam, of the Metropolitan Waterworks and Sewerage System (MWSS);as well as the Philippine
National Railways (PNR) south long-haul project of the Department of Transportation (DOTr). This one
after another loans and investments from China raised concerns, not only inside our country, but also
internationally. Recently, Malaysian Prime Minister Mahathir Mohamad warned the Philippines on over
falling into a "debt trap", as the country banks on China to bolster growth. He said that "regulate or
limit influences from China" should be done in nations like the Philippines.

Dr. Mahathir has repeatedly pledged to renegotiate or cancel what he calls "unfair" Chinese
infrastructure deals authorized by his predecessor Najib Razak, whose nearly decade-long rule ended in
electoral defeat amid a massive financial scandal. He came to power last year.
Nearly ten months after his Pakatan Harapan alliance took control of the Malaysian federal government,
the Mahathir administration is still renegotiating the US$20 billion (S$27.14 billion) East Coast Rail Link
project with China to reduce costs. Before that, in August of last year, a natural gas pipeline in the state
of Sabah in East Malaysia, supported by China, was canceled by the Malaysian government. In a
different direction, Rodrigo Duterte, president of the Philippines, has been appealing to Chinese
investors to contribute to his US$108 billion plan to construct new highways, railways, airports, piers,
and bridges over the next ten years. A "debt trap" may result from this pivot to China, according to
critics.They mentioned Sri Lanka's experience.Sri Lanka received funding from China to have Chinese
construction companies improve its ports. China acquired ownership and control of Sri Lanka's two main
ports by converting the loans into equity when Sri Lanka was unable to repay them. According to Carlos
Dominguez, the secretary of finance for the Philippines, this is unlikely to occur in the country. By the
time Mr. Duterte leaves office in 2022, he said, Chinese loans would only make up 4.5% of the country's
debt. He stated that new taxes and loans with "the lowest possible interest rates and the longest
possible term arrangements" would primarily be used to fund Mr. Duterte's ambitious infrastructure
initiative.

On the other hand, The global debate regarding Africa's debt sustainability has reemerged as a result of
the continent's growing public debt.The narrative that China is using debt to gain geopolitical leverage
by entangling poor nations in unsustainable loans is largely to blame for this. China's rise to prominence
as a major financier of African infrastructure contributed to this.This policy insight questions this idea by
utilizing data on African debt.It explains why Chinese loans are particularly appealing to African
governments and why African debt is rising.It comes to the conclusion that the debt trap narrative
understates the power of African governments to make decisions.However, African governments must
be aware of some significant caveats.These include the influence of China's Belt and Road Initiative (BRI)
on development plans for Africa, the potential influence of skyrocketing debt on African sovereignty,
and the intricate influence of corruption. In total, the poorest countries in the world, many of which are
in Africa, will have to pay $35 billion in debt service in 2022.The World Bank estimates that China is
responsible for approximately 40% of that total.