Debt of developing countries

The national debt of developing countries is different from the national debt developed economies in several categories: the public debt are often higher than in industrialized countries, and they are mainly in foreign currency (mostly U.S. dollars) denominated. In addition occur in underdeveloped and developing economies far more often on national bankruptcies.

Reasons for the high level of debt

The debt -developed economies are explained by public expenditure exceeding income, justify. In developing countries, however, made ​​the following specific reasons for public debt:

Public debt of many developing countries has traditionally been high due to their extensive investment in export-oriented sectors agriculture and resource extraction. This government spending are often justified with the comparative cost advantage, these countries want to achieve in said areas compared to global competitors. Contrary to the hopes, however, these investments did not lead to an increase in export revenues, especially in the 1970s and 1980s. Rather, the increasing international competition led under the commodity-exporting countries in many industries to a fall in world market prices. At the same time had to be spent for the loans as a result of the two oil crises of high interest payments, so that profitability of the expenditure was often not given.

In addition, many developing countries suffer the most economists considers to be a non- efficient lending. Economic theory assumes that investors invest their capital just where it brings the highest return; this assumption does not hold true in most developing countries, however. To lead untrained financial markets, corruption, bad planning and state intervention in many cases to a non- efficient use of the proceeds. As a result, a generation among the interest (which are already higher because of the general development land premium than in developed economies ) is often not possible. This leads to further borrowing and thus to a growing debt.

A problem also exists in the frequent exhibition ( denomination ) of loans in other currencies, especially in U.S. dollars. For example, while a national debt of Germany was banned in foreign currency until recently, many developing countries have no other choice than to their loans denominated in dollars due to the creditor pressure. Thus, the creditors want to avoid the additional risk of a currency devaluation. For the borrowing developing countries, however, this means that a depreciation of the domestic currency is equivalent to a strong increase in the debt (expressed in domestic currency ).

Another problem is the often low saving rate in developing countries. Because of this investment can often only be financed by the inflow of foreign capital.

Data

External debt in 2003 of selected states by creditor:

To payout came open foreign currency loans to foreign creditors. As of end- 2003 ( Ethiopia, Benin, Mali, Mozambique: end of 2002).

Comments

• % GDP: foreign debt as a percentage of gross domestic product
• P. E.: per capita
• International Bank for Reconstruction and Development and IDA are part of organizations of the World Bank Group
• AFDB and ADF are part of organizations of the African Development Bank Group
• IMF: International Monetary Fund

1 These figures also private debtors are included 2 includes loans with an original maturity of up to one year as well as past due loans 3 contradictory information of the source ( World Bank) 4 not affected by the debt relief (see below) * Estimate

• Empty field: corresponds to zero
• Green field: these are to be adopted (see below)

Sources:

Debt relief

In contrast to earlier reports, it was announced on 22 December 2005, that the International Monetary Fund ( IMF), 19 of the 20 poorest countries in the world whose total debt is issued for the financial organization on January 1. This was agreed by the Executive Directors of the IMF in Washington. The decree includes $ 3.3 billion.

As announced on 11 June 2005, the finance ministers of the seven leading industrialized nations and Russia (G8) agreed at their meeting in London on debt relief for the poorest countries in the world.

There are 18 states will be immediately removed all debt to IDA, the IMF, and ADF.

Ethiopia, Bolivia, Ghana, Guyana, Honduras, Madagascar, Mauritania, Mozambique, Nicaragua, Rwanda, Zambia, Tanzania and Uganda, as well as the bound on the Euro CFA countries Benin, Burkina Faso, Mali, Niger and Senegal, to debt be adopted by more than 40 billion U.S. dollars immediately. These countries have reached the completion point ( completion point ) of the HIPC (Highly Indebted Poor Country ) initiative.

Probably soon ( in 12 to 18 months ) to 9 other states may qualify for such debt cancellation: the Democratic Republic of Congo, Gambia, Guinea, Malawi, São Tomé and Principe, Sierra Leone and Guinea- Bissau, as well as the bound on the Euro CFA countries Cameroon and Chad. This will increase the amount aforesaid to about 48 billion U.S. dollars. These states have the decision point ( decision point ) reached the HIPC initiative, and are located in an intermediate stage ( interim period ). For the time being their debt service at IDA and IMF (ADF? ) Are exposed.

11 States can qualify in the longer term: Burundi, Laos, Liberia, Myanmar ( Burma), Somalia, Sudan, and the bound on the Euro CFA States Ivory Coast ( Côte d' Ivoire), the Comoros, the Republic of Congo, Togo and the Central African Republic. This would correspond to about another 7 billion dollars.