There is absolutely without question that debt cancellation is desperately needed for many HIPCs. (Highly Indebted Poor Countries) Debt in many LDCs (Lesser Developed Countries) is causing a perverse transfer of prosperity from impoverished peoples to their creditors. Over the years of 1981 through 1987, less developed countries paid approximately $1. 5 trillion U. S more in debt service than they received in new loans. In 1995, the countries of Latin America had a total external debt burden of more than $600 billion.
These debt payments, and the structural adjustment conditions imposed by creditors, exacerbate inequalities among nations, which are resulting in the deaths of many innocent people and overall disfigurement of many LDCs economical development. Majority of the debt that still burdens many of the LDCs today, can be retraced back to the end of the 1970's when many oil-exporting countries had large amounts of extra money (also known as Petro dollars) because of the price of petroleum skyrocketed on the world market.
This money was then invested into Western banks and financial institutions, which in turn loaned a lot of that money to Third World countries for big development projects. In many cases, these projects failed and many countries were not able to repay their owns loans back. Several factors caused the size of these debts to start growing very fast. These factors include rises in world interest rates, global recessions, poor economical decisions, political corruption, and the low commodity prices of main exports.
Keep in mind all these loans must be paid in hard currency, which LDCs don't have because their dollar is relatively weak. A country like Zambia for instance is the exact prototype on an LDC. Like many other developing nations, Zambia borrowed heavily in the 1970's hoping to develop its economy and infrastructure. This could not be done without injections of large amounts of money. Zambia like the rest of the world could not foresee the economic collapse of the 1980s and now owe collectively as a country more than 6. 5 billion or about 165% of their GDP.
The worst part being in debt as a nation is the impact it has on its people. In Zambia, most people don't have enough food to eat. These people are falling behind a nutritional poverty line that was about 70% in 1996. Child malnutrition increased from 39% in 1991 to over 50% in 1995. Life expectancy at birth in 1995 was 45 years, compared to 47 years in 1990 and 50 years in 1980. It is evident that a country like Zambia can no longer keep operating at the same pace as it is at the moment. The Zambian people are suffering the repercussions for mistakes that were made way before most were even born.
Majority of LCD's spend more on debt payments to Western banks and financial institutions than they actually do on social programs like education and health care. A country like Zambia for instance is trapped in a cycle of economic under-development to the very extreme. A quarter of its annual budget of $800 million goes to repay foreign creditors. Zambia needs to spend a minimum of $25 per person annually on health care; it spends less than $3. Zambians are forced to. The only question is, how can this change?
The only solution to situation like this is to cancel Zambia's debt. Canceling their debt would allow them to rejuvenate their economy and free up some much needed finances, so that social services like education and health care can be restored. With this money, the government could also adequately supply enough food for the populace to flourish. Canceling LDCs debt is the appropriate approach to take in order to help millions of impoverished people around the world. Another alternative to canceling debt is the restructuring of a countries debt.
Although, this s a disingenuous approach only because prolongs the enviable and does not provide a long-term solution to the problem. Structural Adjustment Programs or better known as SAPs, only hinder a countries future progress because it deprives a countries of their most marketable commodities. In the late 1980's the IMF implanted an outrageous SAP forcing Zambia to privatize their most lucrative resource, their copper industry. Zambia also had to cut tariffs and subsidies to local industries, exposing them to world competition
Even with these measures the IMF considered to be beneficial between 1990-1996, the GDP registered a negative growth averaging -1. 1%/year. This just goes to show that without a countries most lucrative asset, economic growth for any LDC is impossible. Third world debt claims hundreds of lives daily by forcing debtor nations to spend several times more on debt repayments than on the basic health, education and sanitation needs of their populations. Despite this, most developing nations are not even making a dent in the interest that has accumulated, let alone the debt itself.
Meanwhile, developing countries are forced to deplete their natural resources in order to repay their loans, rather than being able to use them to develop their own economies. The canceling of debt would wipe many slates clean all over the world and give an opportunity to millions of people to live a higher standard of living . If third world debt is canceled, every LDC will still be poor, but at least they will have a fair shot at a higher quality of life and a future that brings optimism rather than obscurity!