Debt Hinders Development of Poor Countries Essay

The economy of the country is also undermined since all the sectors of the economy including health sector, education sector, agricultural sector, tourism sector and other sectors are compromised for the country to repay back the debts. 2. Its leads to low capital stock This is experienced due to regular payments of debts by the developing countries. Low level of investments, low outputs from the industries and farms, low savings are also experienced due to repayments of loans. A country fails to save any money for use in profitable projects; little or no capital is accumulated for development purposes. A country fails to attract F. D. Is i. e. foreign direct investments which could bring about development processes. These investors curtail their investments in these poor countries and transfer them to safer countries hence causing capital flights. 3. Debt leads to inflation. This is the general rise in price of goods and services in a country. The money borrowed may exceed the supply of goods and services hence causing inflation. If a debt is not managed properly then it will affect the whole country and its production systems. These leads to loss in stability in real value of money and other monetary items. It discourages investments of savings and shortages of goods if the consumer begins hoarding out of concern that prices will increase in future. 4. Weak currencies. When a nation has a bigger debt the economy grows slowly or totally stagnates. These poor nations are asked by their trading partners to devalue their currencies to make their goods cheaper for them to buy. Devaluation of a countries currency affects the production sectors since the prices have fallen hence making it less worth to produce because the currencies of the country’s exports are weak. This leads to continuous repayment of loans since the poor country cannot access the international markets with their weak currency hence cannot get the hard currencies. 5 . Debt hinders trade. Most of the highly indebted poor countries are endowed with raw materials and other resources. Due to this presence of natural resources they have benefited from the international trade partners. So due to loan binge of the excessive debt on the poorer countries the trading partners and trading blocs shy away since they do not want to be associated with a highly indebted country. This leads to slow economic growth and development of the country since they have to trade with countries with the same features and therefore and they cannot get a lot of finances. Most of these products from developing counties are exported to developed countries. So when these poor nations are faced with high level of protectionism in the international markets they experience a sharp reduction of exports leading to unfavorable balance of payment. The developed or trading countries bring up /erect protectionist laws inform of tariffs quotas, or standard of goods hence locking out most of the primary exports from the poor countries from accessing international markets. 6 . Debts and environment. Environmental issues, poverty and debts are very much related. This is because the more the developing countries stay. Developing countries stay in debts, the more they will feel that they need to exploit the earth or natural resources for the hard cash they bring in. the poor countries also have to cut back on its social, health, endowment, conservation, employment and other important programs, cutting back on all these issues means the country will not realize development process. These are main pillars of any development process to advance. The countries development will stagnate since all the sectors necessary to steer forward have been cut back.