Damp mortar

At the house my daughter recently moved to, the mortar on a small external wall is crumbling, and on the inside wall the mortar is damp, and is staining the wall finish. The exterior of the wall is covered in masonry paint, would this be causing the problem? No problem with the other walls.
What is the best treatment, would Thompsons Water Seal be satisfactory, or would it be better to repoint the wall?

Rake out and re-point first i would say. doesnt the wall have a cavity ? is it solid construction ?

it may have been built in frosty weather.