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Why are some countries in debt? What impact does it have on development?

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Introduction

Debt & Development Why are some countries in debt? What impact does it have on development? What is debt? On an international scale, debt is the owing of money from one country to another or an international organisation as a result of previous borrowing because of need. Why are some countries in debt? Countries can be in debt for different reasons: 1) Trade deficit When a country's imports are worth more than a country's exports, the country loses money and therefore it is forced to borrow money from other countries or international organisations to try and cover the losses. 2) Natural disasters and tied aid After a natural disaster, a country may become dependent on the aid of another country for a short period of time. However sometimes the aid given is tied aid where the country receiving aid may have to pay back the money given (possibly with interest). ...read more.

Middle

This can overall help to fight poverty and reduce the development gap. In 2005, Zambia had $4 million of debt cancelled and in 2006 it had enough money to pay for free healthcare for millions of people living in rural areas, improving the quality of life. In Tanzania, money saved from debt cancellations allowed the government to abolish primary school fees in 2001. As a result, the number of students that go to primary school doubled. These examples show that by cancelling debt, it allows money to be invested in education which can lead to more people getting jobs, overall contributing to a country's economy, improving the GDP and by investing in healthcare, the life expectancy and infant mortality rate can also decrease. Summary: -a country can invest in its development -It reduces poverty and can reduce the development gap -examples include Zambia and Tanzania Disadvantages - Although cancelling debt can help a country to develop, there are also some disadvantages. ...read more.

Conclusion

They were first established in the 1980s in the attempt of solving two problems with one agreement: 1) to minimize the debt of developing nations and 2) to minimize the environmental destruction that frequently takes place in developing countries. A company called WWF (world wide fund for nature) which cooperates with countries such as UK and USA has helped to structure and design many debt for nature swaps. In 2008 they helped to structure and facilitate one of the largest debt for nature swaps in Madagascar's history in which 20 million dollars was committed to preserve the country's rich biodiversity. Also in 2008, the USA reduced Peru's debt by $25 million in exchange for conserving its rainforests. Debt for nature swaps are extremely beneficial because they not only cancel the debt of a country allowing them to invest in development, but it helps to protect the environment and conserve some of the world's rainforests. This makes it better than just cancelling debt. ?? ?? ?? ?? ...read more.

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