My Irreversible Point of View

Unfortunately freedom of speech is not totally respected in some parts of the world. That is why I decide to express my point of view in the name of those who are not allowed to express themselves. STAND UP, SPEAK UP! STOP THE TRAFFIK

Saturday, October 14, 2006

Should developed countries cancel the debts of the poorest nations?


In my point of view, the burden of international debt, such as trade deficit and budget deficit, affects many countries worldwide, specially the non developed. In fact, most of them see their economies gradually going backward, dominated by the need to repay debt day by day.
Borrowing and lending money can initially be seen as beneficial to both parties. The borrowers often value the money now more than in the future while the lenders value the promise of having more money in the future. In other words, the borrowers invest their loans in order to create new wealth so that they can pay interest to their lenders. If one state’s economy is healthy, it can borrow some money from banks, multinational corporations or even foreign governments to make profits, so it can repay the debts a few months or years later. Economic and financial stability encourages investments in all sector types and it also stimulates lenders’ confidence.
On the other hand, it seems that poor countries, most of which are in Africa, had to face a horrifying debt crisis. In the 1970’s and 1980’s, interest rates rose globally and debts kept accumulating as well as wealth started to diminish. But the huge debt still remains. Most of developing countries’ income goes to paying interest on their loans, and more money must be borrowed to keep their economies in operation. That is a vicious circle which is very hard to escape. Moreover, when a state fails to repay debts it can no longer borrow money in the future. Such situation, which is declared bankruptcy, impedes economic growth, destroys lenders’ confidence and, as a result, loans can be cut off. Generally, national debt represents loss of power.
For example, in 2004 Africa has presented $300 billion on foreign debt, which was 43% of its GDP.
Recently, campaigns have been developed by activists and NGOs in order to call for total debt forgiveness for the poorest countries. It is actually unimaginable how billions of dollars of debt are impeding the Global South from eradicating or halving illiteracy, providing better schooling and healthcare services, investing in modern technology and infrastructures such as bridges, railways and highways, and more. These vital measures, specially the first ones, are the basis for a country’s economic development and the best weapon to fight against poverty and starvation that affect millions of people worldwide, particularly in Africa. Even though a huge part of the debts have already been repaid, the Global South is still forced to repay hundreds of millions of dollars to the North. Such situation is becoming more and more intolerable: that is why I think the debts must be cancelled immediately so that it can be given the chance to build stable and successful economies, like China’s, to develop a healthier trade and, most important of all, to provide better living conditions in the world’s most impoverished countries.
Although some critics argue that such cancellation put more money in the hands of crooked governments, we must not forget that, in 2005, G8 have been working on a plan to eliminate the debts owed by some impoverished countries to the World Bank and International Monetary Fund (IMF). It seems that G8 members have agreed to cut in half the poorest countries’ debts. Despite a general stabilization, third world countries have not totally yet solved the debt problem.
All in all, debt forgiveness and Western aid may be considered a step towards the economic development in the Global South. Despite this, developing countries must stop thinking that poverty and economic instability can only be halted by depending on foreign aid. It is time to learn to be responsible in order to make decisions concerning the countries’ vital issues and, most of all, to be self-sufficient rather than depending on the richest countries’ decisions.

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