Problem
External debt
Other Names:
External national budget deficitForeign 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.
Broader Problems:
National public debtFiscal and trade imbalancesDependence on external resourcesUnsustainable economic developmentDeterioration in external financial position of countries Narrower Problems:
External debt crisisExcessive external trade deficitsBurden of servicing foreign public debtOver-dependency on international financial institutions Aggravates:
Underpayment for workRestrictions imposed on foreign aidVulnerability of least developed countriesInstability of production of food and live animals Strategies:
Increasing state efficiencyIncurring foreign public debtIncurring debtPaying off foreign debtBalancing national budgetBorrowing by governmentFinancing deficits in recessionAvoiding foreign debt Organizations:
Enhanced Heavily Indebted Poor Countries Initiative (HIPC Initiative)African Forum and Network on Debt and Development (AFRODAD)ECOWAS Network on Debt and Development (ECONDAD)European Network on Debt and Development (EURODAD)Forum on Debt and Development (FONDAD)Jubilee South - Asian Peoples' Movement on Debt and Development (JSAPMDD)Debt Relief International (DRI)Freedom from Debt Coalition (FDC)The World Bank GroupInternational Monetary Fund (IMF)Overseas Development Institute (ODI)Oxfam InternationalUnited Nations Development Programme (UNDP) References:
Griffith-Jones, Stephany: Managing World DebtFrenkel, Jacob A; Dooley, Michael P and Wickham, Peter: Analytical Issues in Debt Subject(s):
Commerce → CreditCommerce → Finance
Societal Problems → Dependence
Society → Foreign
Related UN Sustainable Development Goals:
Problem Type:
D: Detailed problems Date of last update
03.09.2020 – 16:13 CEST