Problem

External national budget deficit

Other Names:
Foreign debt
Dependence of countries on budget deficit financing through external borrowing
Nature:

Foreign debt is a problem which generates other problems. Thus internal debt (augmented by the transfer of resources to the export sectors, including subsidies and incentives for exports), inflation, economic stagnation, increasing levels of unemployment and underemployment, declining real salaries and levels of nutrition, health etc., can originate in the austerity imposed by the foreign debt.

Incidence:

[Industrialized countries] In the USA in the 1980, the total federal debt was $914 billion. In 1990 it is $3 trillion and rising. The annual net interest payments on that debt were $52 billion in 1980. In 1990 they are nearing $200 billion, accounting for 15% of the annual budget. A balanced budget according to the Gramm-Rudman balanced-budget law would limit the deficit to $64 billion. A succession of large trade deficits over the previous years, means that by 1994, the UK's net assets position, worth £110 billion in 1987, would be wiped out. It was predicted that the current account deficit would reach £25 billion by 1997.

 

Claim:

Most western developed countries have gone through a decade of dissembling about their fiscal condition. Nations have been living on borrowed money. The political age of the marketeer, intent on capturing votes, has driven honesty and substance from politics, encouraging in its place irrelevance and avoidance.

 

Counter Claim:

While considerable analysis has been available indicating that the proximate cause of the sharp and severe deterioration of debtor countries resulted from changes in the external environment that were beyond the control of the debtor countries themselves, articulation of the international debt strategy has focused primarily on shortcomings in policy formulation in the debtor countries. It has never been explained why it is that, within the space of a few years, such grave shortfalls in management should arise simultaneously in such a large number of countries.

Problem Type:
D: Detailed problems
Related UN Sustainable Development Goals:
GOAL 16: Peace and Justice Strong Institutions
Date of last update
14.05.2019 – 16:56 CEST