Debt of Developing Countries

The debt of developing countries is external debt incurred by governments of developing countries, generally in quantities beyond the governments' political ability to repay. "Unpayable debt" is external debt with interest that exceeds what the country's politicians think they can collect from taxpayers, based on the nation's gross domestic product, thus preventing the debt from ever being repaid.

The causes of debt are a result of many factors, including:

  • Legacy of colonialism — for example, developing countries’ debt is partly the result of the transfer of the debts of the colonizing states to these countries, in billions of dollars, at very high interest rates.
  • Odious debt, whereby debt is incurred as developed countries loaned money to dictators or other corrupt leaders when it was known that the money would be wasted. South Africa, for example shortly after freedom from apartheid had to pay debts incurred by the apartheid regime.
  • Mismanaged spending and lending by the West in the 1960s and 70s.

Some of the current levels of debt were amassed following the 1973 oil crisis. Increases in oil prices forced many poorer nations' governments to borrow heavily to purchase politically essential supplies. At the same time, OPEC funds deposited in western banks provided a ready source of funds for loans. While a proportion of borrowed funds went towards infrastructure and economic development financed by central governments, a proportion was lost to corruption and about one-fifth was spent on arms.

Read more about Debt Of Developing Countries:  Debt Abolition, Debt As A Mechanism in Economic Crisis, Recent Debt Relief

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