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Country debtsCountry debt is the amount that a country or nation owes to other countries or international finance agencies. Alike an individual, various countries across the world also take different types of loans for different purposes, for e.g. the development purposes. These loans are required to be paid back in most of the cases along with the interest. It is important to note here, that the national debt is also one of the important sources for the central, or the federal government by which it funds different types of programs. There are many developing countries in the world that need financial help from various other developed countries like United States, U.K etc. in order to carry out different development activities. There are also huge amounts that are provided to the developing countries by various international agencies like World Bank, IMF etc. Most of the third world countries are indebted due to country debts and even some of them are so heavily indebted, that loans against them have to be waived off. The country debt is sometimes called as the government debt or public debt. Since the government in any country is represented by its people, it can be rightly said that the government debts is an indirect debt taken by the various taxpayers in the nation. The country debt is normally categorized into external debt as it is taken from other countries or international development and finance agencies. The debt is normally provided by way of loans and sometimes, the government of a nation also sells different types of government securities like bonds etc in order to get the loans. Third world countries have always depended upon international loans, as the sources of revenue in such countries do not enough funds to fund the various development activities. Let us now discuss the various aspects related to country debts next.
VARIOUS ASPECTS RELATED TO COUNTRY DEBT
There are many aspects related to country debt that need to be understood completely. First of all, the governments of various countries try to borrow money in the currency that has a strong demand. For example, U.S Dollar is considered as one of the most sought after currencies. Similarly, Euro is also a good option when it comes to getting an international debt by any country. Various governments that take loan by way of issuing bonds in the international market usually issue bonds in these currencies only. The other aspect that needs to be understood here is that there is always a risk associated with such loans. Since these loans are mostly obtained by the developing countries, the repayment of these loans is considered as very difficult. This is because development is a continuous process and it takes many decades or even centuries for a developing country to become a developed country.
This is also the reason why many international development agencies provide financial help in the form of grant rather than loan so that there is no excess financial burden that is put on any country to repay the debt. The other aspect that needs to be understood regarding the country debt is that there are many public clearing standards that are set by various international agencies so that a country receiving the payment or paying the payment do not face any problem. Generally, the public debt clearing standards at the international level are set by the Bank of International Settlements. It is not that once the standards are set by this agency regarding the country debts, there is no default made by any country. Of course, there are defaults as the complex laws regarding the repayment vary from one jurisdiction to another. In such cases, where the defaults have been made in the repayment of country debt, IMF or the International Monetary Fund intervenes to settle the matter. It is very important to note here that in case of country debts, IMF has the power to intervene and prevent any anticipated default regarding the payment by any country to clear the country debts. However, the various measures that have been taken up by IMF have been criticized on different grounds. When it comes to country debt, there has to be a mentioning about the poor countries that are is suffering severely from the non-repayment of country debts. Let us discuss it next.
COUNTRY DEBTS OF POOR COUNTRIES
The country debt of poor countries across the globe is a never-ending story. Though there is no debt crisis that can threaten the international financial system, as has happened many times in the past, the poor countries still owe huge debts to other countries. The poor countries comprise many Latin American countries and other middle-income countries. There have been many measures that have been taken to help these countries to come out of huge country debts. For example, the Brady Plan, domestic reform programs and various commercial debt relief measures have been undertaken to help these countries. But since the indebtedness is so huge, it is not easy for these poor countries to show any sign of improvement very quickly. These poor countries are also called as SIliCs or Severely Indebted Low Income Countries. These countries because of various types of predicaments are unable to repay the country debt. This is in fact understood by most of the nations and this is the reason why many of these even have written off such debts. But it is important to note here that while doing so; many developed countries have of course fulfilled their non-financial purposes in such countries. In the times to come, the poor countries are expected to face harsh situations regarding country debt.
Since there are many developing or poor countries in the world and thus the country debts are almost everywhere. In each continent, there are many poor and developing countries that require continuous international flow of financial support in the form of loans. No doubt, poor countries get exploited some times by country debt, but there is no other option either. However, the country debt also helps in initiate anew process of development.
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