Debt factor in Developing Countries

The aspect of external borrowing by the developing countries from the developed nations and other global finances such as the World Bank, IMF and OPEC above other comes out as a fundamental aspect in defining the state of growth and development in these nations. Due to the economic inequalities which are perhaps rooted on the grounds of post-colonial effects of the global south nations by the Northern countries, such southern countries have only found refuge from their low economic activity through external borrowing.In every activity involved in the same, the rationality behind the future economic developments and these debts however remains debatable. At one level, a rational economist would wonder of the exact parameters with which the development effect of the developing countries would not be compromised by the authorities of the same external borrowing.

As there continues to be an encountered scale of diversity in the economic dispensations between the global economies, external borrowing by the third world countries has been a basic tool for the development process.However, the arising process is the recurring nature of the debts. However, every epoch into economic research and study about the state of economic authority has provided sufficiency of resources within these developing countries. The basic inhibitors in the success such economies have been the lack of proper exploitation factors running from, the human resource capital, technology, funds and the skills of use in exploitation.

To bridge the existing gap in the exploitation abilities, such developing countries have the chosen to seek refuge through external borrowing from he Northern states. ( Panos, 1999) The rationale of the North - South dialogue encompasses various aspects which provide an elaborated scale of the internal relations, economic integration, international trade, and debt financing between these global partners.The UN report of the 17th June in Geneva revealed a debt of $40 billion which was owed by around 18 countries among which were 14 were from Africa. However, the same debt was to be relieved above additional financing from the western countries.

However, as the level of the debt continues to increase through more financing the debt management process and the requirements should not be benchmark for continued poverty and inhibited development in these countries.Broadly however, every debt activity has been allied to various relations, embargoes and agreement with which the developing countries have been required to fulfill as terms for the debt provisions. (Kline, 2005) Though the developing countries have continued to embrace high disbursement on foreign acts through donor countries, World Bank, and others, they have continued in being encumbered by the big debt obligations of debt repaying than what they are getting. The World Bank report shows of $50 billion repayments compared to around $42 billion they had received in 2006.High debts owed by such developing countries have been launching pad for extra-ordinary capital outflows than the relative inflows through debt financing.

This has been the recurring dent crisis to since 1986. The high outflow whose component is the basic of payments on high rates of interest has been stumbling blocks for policies on economic growth pursued by these countries. To rescue the high debt accounts, slashing of existing loan credits has been a major track by the chief global financiers.Every effect of net debt outflows has been the chief economic inhibitor to the development of the domestic economic activity by developing countries. However, if the same debt is to provide standards of ensuring the success of its mission, then every debt activity should not provide grounds for future economic developments in these countries. Apparently therefore, every debt activity should be a factor aimed at providing support for both short run and long run developments.

Generally, external debt financing within the internal relations is aimed at funding high density projects whose maturity period is long and mainly embraced in the long run (future) economic cycles. The success in these projects depends on the basic discounting factors with which the cost and benefits outlay of such projects is monitored. Due to the discretionary need for high development within these countries, various projects are laid down as a variety of choices.On rational grounds however, the failure of success allied to the debts by the developing countries can be argued on the influence of both the high cost of financing (in terms of cost of repayments and extra-ordinary requirements for their investment) by the financiers and the economic inadequacies vigilant to the planning and evaluation process for the development project by these developing countries. On grounds of economic rationality, the success in the future economic development of the borrowing countries can be argued as a two-principle support factors.

However, intensity in research activity should never be compromised if the effects of these two factors are to be scrutinized. Though the international trade relation between the global financiers and borrowers have radically been changed by the regulation requirement of such debts, every activity inset of handling these debts should not hinder the futuristic benefits in development protocols by the borrowers. To the developing countries, borrowing remains substantially an important tool in their economic developments.Their poor levels in terms of economic development parameters have forced them to seek refuge from external borrowing. Such finances have levied various requirements on their repayment and use.

Primarily, the aspect of high repayment interest above that of investment requirements are aspects of consideration in the future success of these countries. The general net outflow on income gains has been on the higher to that of the financial inflows. As a basic rule in the economic autonomy, the relationship between capital inflow and outflow impacts a lot to the discretional factor of the balance of payments (BOP).According to the World Bank statistical report of 2006, the global south countries have revealed inequalities and unfavorability into the standards of BOP. Consequently, these countries have been faced with high capital outflow than inflows. (Penq, 2004) Despite the high current levels of debts in the developing countries, the future development in their economies should be a compound factor into the roles played by both the financiers and the domestic borrowers.

The better part of influence is however allied to the conceptional framework and the structural parameters which are adapted by such developing countries in their development autonomy. At one level, these countries have failed to support detailed methodologies which seek to provide grounds for a developed economic activity. Within the domestic economic framework, the debts should be taken as simple elements which are operated within a one factor aspect of government spending for the investment process within the economic systems. Since this debt variable captures fundamentally a smaller factor within the broad economic activity.The basic ideology behind the success in such economic development should be the proficiency in providing a sound economic growth within their economic proximities. The aspect of external debt and its handling should not be taken as loopholes for the poor economic activities.

(Foley, Pyle, 2003) However, in every attempt to put in place the debt financing structures, the aspect of moral hazard argument should be factored in. This tries to argue on the moral rationality on debt cancellation by the World Bank and other financiers the developing countries.Accordingly, the terms on the amount of debt relieve should be rationalized. Otherwise such relieves would only be temporary before providing new modalities of more borrowing by such developing countries in the future.

Such future loans would be rendered in bad terms which would not provide requirements for better states of economic development. The basic entitlement to the success in the debts has been though high efficiency in their use through pursuit to the policies for debt management. However, this management is mode to work in a balance of the conflicting objectives for such funds.This debt management involves a wide conception in which international relations are founded between the financiers and the borrowers. It will include formal regulations on the existing relation between the borrowers and the creditors, methods of reducing risks and uncertainties in the physical applications of debt in development projects, the transparency and the information levied on the basics of the debt, the relationships that exists between the policy makers and the managers of the debt and the general portfolio’s allied to the authenticity of the environmental variables which will capture the debt.The World Bank and IMF have ensured collateral liabilities between the parties allied to the debts.

Diplomatic structures in North-South Dialogue have provided negotiation terms in the trade factor between the global rich states and the poor nations. The basic implicit support for a rational success in the debt factor has been through measures which provide support for conventional management in the debt finances under the global financial imagery. The developing countries have been factored as poor managers of such funds through embezzlement corruption, expenditure on unviable projects above that of poor leading economic conceptions.Any poor management in the same has even called for international financing sanctions and trade embargoes between global trading partners.

Though some restrictions on the management have been voiced diplomatic ties and invalid restrictions, they have done a lot in providing for a support for higher scales of management. Any future allied economic development benefit to the borrowers should never compromise high scales of debt management. (Barnett, 2001) Either, every borrowed finance is coupled with multiplicity into number and scales of investment projects.Developing countries are coupled with a diversity into the basic number of projects which should be funded by these funded. With the diversity into these projects adequacy into the planning and evaluation remains an important factor if the success of this debt is to bring economic development. With the debt burden for the developing countries going to $ 1.

7 trillion, there are various programs that the World Bank and other primary financiers initiate to deal with this problem. Iraq embraces the effects of these programs which have even helped to strengthen its economic stability.Firstly, debt cancellation for the debt owed to these countries has been enabled through the use of the reserve accumulations by the financiers. From the $ 17.

1 billion reserve accumulation, much of these debts have been cancelled. Either, they have written off various loans whose projects have been in economic failures with bringing negative relations to the existing population and the general environment. They have also led a practical scrutiny of the disbursed funds and whose project performance shows failures.These programs have widely been applicable in Iraq and the general developing countries.

Debt cancellation had ramifications has however been the backbone of a broad conditions of diplomatic ties and sanctions. Various dictatorship authorities have been impersonalized to the developing countries by the financiers. Every debt cancellation and ramification had led to various ill motive lending structures by the financiers to the developing countries. The success to the planning and evaluation process would however call for adequacy in the principle requirements of adequacy in the investment process.The aspect of using rolling plans in their investment should form the basic factor where the success of one project leads to the other.

Various investment concepts should adequately be used to provide grounds for the most beneficiary projects. This could be through, use of cost-benefit analysis, benefit cost ratio, internal rate of returns above others. These are the basic ratios that measure the profitability of the different projects. (Nash, 2003) At every verge of dealing with external debt, a rational economist would argue of the activity as basing its roots on the economic culture of the domestic borrower.Any external borrowing is only effective on fundamentally small scale to the general economic autonomy.

The basic modality that shapes the nature of the future economic development is the broad economic structures and systems operating within such economics. Generally every success in economic development and growth is the compound influence of the nature of activities within the state’s activities. The basic tool for every rational activity for economic development is the way with the broad economic autonomy function. Indeed, future economic activity implies the use of tools and methods for adequate economic performance.

Every development activity should involve both fiscal and monitory factors. However, the generalized economic activities have failed to involve standard activities of fiscal and monitory economic factors. Law performance in monitory activity has been compromised by he various rigidities operating in the monitory economy. These countries have waged high states of disequilibrium between the supply and demand compliments within the economic frontiers. Lack of equilibrium stability within such demand and supply in the money market has resulted in inflationary and deflationary factors.High supply of money than its demand has led to inflation.

Lower supply than demand has led to deflation. The value and the purchasing power of the domestic currency also commensurate to the factors of foreign and international trade relations between trading partners. Various economic disadvantages have resulted from regional trading integration where negatively impact the state’s balance of payments. For any economic development activity, such domestic economies of developing countries should involve parameters with which high economic financial and money market are stabilized.Either, the state of the fiscal policy should be founded on grounds which foster a higher economic activity. However, developing countries have been unable to provide adequate grounds for improved fiscal policies for strengthening the economic activity.

There have been inadequacies in the government spending and the taxing system by the domestic fiscal policy control. However, strong fiscal policy should be provided as a basic input for a better state of activity.Summarily, developing countries has a broadened scale in the choice of levels to operate in which provides future development in their economy together with an increased state of dealing with debt issues from external financing. This would involve a coordinated approach in monitoring the state of debt management above that of structuring the domestic state of activity which should involve a coordinated approach between the monetary and fiscal policies. Otherwise, debt aspect should not be used as a tool for poor economic growth and development but should rather be a pivot element towards frontier of expanded development in the future.