• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Debt Relief in Tanzania

Extracts from this document...


Debt Relief in Tanzania a) The economic concept of opportunity cost in Tanzania is relevant because it essentially underlines what is being lost because the country is servicing its debts. Opportunity cost is an economic concept that states that for every resource (except free goods) that is allocated there is an opportunity cost, or in non-economic terms, something, somewhere or somebody loses out because the resources were not allocated elsewhere. The opportunity cost of a country consuming consumer goods is often investment in capital goods. In Tanzania's case, as an economically developing country, the opportunity cost is evidently basic investment in social infrastructure. Education, Health Care, Infrastructure and other such vital things receive very little money because the money that would have been spent on them has to be spent on servicing foreign debt. b) Countries such as Tanzania have serious debt problems because of their attempts to develop economically. In order to gain a better quality of life, western technology is imported. ...read more.


This effectively culminates in a vicious cycle. Because debts are so high, there is little money to be spent on developmental infrastructure, so that debts continue to grow, and more interest needs to be paid. Many developing countries have tended either to follow a path of Import Substitution industrialisation or the creation of an outward-looking economy so that foreign capital could be earned and spent. Because the former has sometimes collapsed through a lack of resources or expertise, and the latter has suffered from inelastic demand curves and sudden shifts in demand and supply with changing harvests and commodity price movements, countries have often been forced to borrow to adjust to another strategy. c) Arguments for the cancellation of debt hinge on the notion that HIPC's should be given a chance to develop. Backers of such a case see HIPC's as being essentially constrained by debt, not by a historical inability to develop by an innate sociological aversion to such a process. ...read more.


Arguments against the cancellation of debt focus on the notion that cancelling debt would send the wrong signal to HIPC's. Many African countries such as Tanzania have been given ample opportunity to develop. In 1960, Zaire and South Korea were in roughly the same situation. Both had economic support and backing, from Belgium and America respectively. However, in contrast to South Korea, Zaire has actually gone backwards in terms of per capita GDP. If debt were to be cancelled, then this would not lead to development. It would merely lead to more money being given back to the developing countries, who would borrow even more, safe in the knowledge that they can borrow as much as they like, without the need to repay it, and without the need to restructure the economy, society or government so that the money was used effectively. Not only would debt cancellation threaten the fundamental basis of loans, but it would also threaten the fabric of the international banking system, as many banks have large liabilities abroad. Charlie Delingpole Debt Relief Page 2 of 2 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Third-world Debt

    As a result, the government owned most businesses enterprises, and there was distrust in foreign investment and the private sector. Even in initially capitalist countries like Kenya, the government began to eventually control economic operations.

  2. Analysis of some fundamental arguments claimed by Albert Hirschman and Gunnar Myrdal

    forth and enlisting for development purposes resources that are scattered, hidden, or badly utilised. A backward linkage refers to the inputs which an industry employs, which connect it with the producers of raw materials, machinery, and semi-finished goods; a forward linkage refers to the output which an industry sells to other industries rather than to final consumers.

  1. The National Debt

    The rate at which the debt is increasing depends on the budget deficit, which is the difference between the government's revenue and spending. The government has not always run a budget deficit, and actually frequently ran surpluses before the Great Depression.

  2. Should world debt be cancelled?

    In 1987, the average per capita income for people living in the poor countries in the South was only 6 percent of the income in the developed countries of the North. In Africa, one-fifth of the population lives in poverty, with those in sub-Saharan Africa bearing the heaviest burden.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work