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Least Developed Countries Debt Crises - Essay Example

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Least Developed Countries Debt Crises

These nations often desperately need to increase budgets for education, health care, and environmental protection, but must instead pay back loans (International Debt 2005). In 1998, the total debt stock of least developed countries (LDCs) amounted to US$154 billion. This is almost four times as high as the LDC's debt stock of 1980 (Eurodad 2001, p.11). The Harvard University Centre for the Environment's Forum on Religion and Ecology (2005) cites that a major reason governments incur debt is that they are attempting to stabilize the value of their currencies. A government borrows an amount of another, more stable currency ["hard currency"], and then sells that currency to its own domestic companies in order to keep the price of foreign currency from rising, which would make the value of the nation's own currency fall.
In its latest triennial review of the list of Least Developed Countries in 2003, the Economic and Social Council of the United Nations used the following three criteria for the identification of the least developed countries (LDCs): (1) a low-i ...Show more

Summary

Debt is a tool that, when used prudently, helps governments plan and pay for large public works projects. Borrowing is essential when the cost of a necessary, worthwhile capital investment is prohibitive. Where the state undertakes these types of financial obligations to fulfil needed improvements or expansions to the state's infrastructure, just as with one's personal finances, it is vital that great care be exercised to determine what the state borrows for, how much it borrows, for how long and when it borrows-all have critical importance to the state's overall economic health…
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