Why is borrowing money from other countries bad?

The Impact of Rising Foreign Debt Excessive levels of foreign debt can hamper countries’ ability to invest in their economic future—whether it be via infrastructure, education, or health care—as their limited revenue goes to servicing their loans. This thwarts long-term economic growth.

How does debt affect a developing country?

The existence of debt has both social and financial costs. Heavily indebted poor countries have higher rates of infant mortality, disease, illiteracy, and malnutrition than other countries in the developing world, according to the UN Development Program (UNDP).

Which country has no external debt?

1. Hong Kong —0.1%. Hong Kong’s market-driven economy is characterised by a lucrative financial banking sector, well-regulated financial controls, large foreign exchange reserves, and virtually no public debt.

Where did most third world countries get their debt from?

Some countries like Indonesia acquired debts from the colonial rulers (Dutch) but for most countries their debt accumulated during the 60s, 70s and 80s. This shows the burden of debt faced by developing economies.

Why are interest rates so high in third world countries?

The oil price shock also caused inflation and therefore higher interest rates. This meant that third world countries were faced with both higher debt, but also a higher % of debt interest payments.

Is there pressure to write off Third World debt?

Therefore, in the West, there has been much pressure for the government to write off Third World Debt. In 2005 Live 8, raised the issue again, with Governments taking some steps to cancel Third World Debt. However, critics argue this debt was cancelled by merely using existing Aid money.

How much does developing country spend on debt?

Many developing countries spend a high % of GDP on servicing the debt burdens. For example, it has been estimated that for some sub-Saharan African Countries the interest on their debt burden is over 200% of their total export value. Therefore, in the West, there has been much pressure for the government to write off Third World Debt.