ECONOMICS
ECONOMIC DEVELOPMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They wanted to build hospitals, schools, airports etc
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They owed money to other countries and banks
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The interest rates went up
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Cheap imports of crops.
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Detailed explanation-1: -Poor debt management and low government revenues due to inefficient tax policies and weaknesses in the rule of law are among the internal causes. Furthermore, the loans are often used for the consumption of goods, rather than for productive investments.
Detailed explanation-2: -Borrowing allows governments to spend more on public services and projects than they raise in taxes. They often borrow to bridge that gap between their income and spending because tax rises are politically difficult, leaving citizens with less money and threatening economic growth, as the BBC reports.
Detailed explanation-3: -Debt relief is part of a larger effort to address the development needs of low-income countries. For debt reduction to have a tangible impact on poverty, the additional money needs to be spent on programs that benefit the poor.