Since you do not want to spend money on rectifying the problem,there is one low cost remedy. You can use tiles on the wall...cheap ones..and paint over the tiles.This will stop the seepage and dampness.You can use the uneven slate tiles which are not only cheap but give an uneven texture to the walls.This of course does not fix your problem 'inside' the wall ..which requires some work..but will not show on the outside and your paint peeling off problem is well taken care of.
