Evaluation of the Arguments for and Against Cancelling or Writing of Ledc Debt

Topics: World Bank, International Monetary Fund, Development Pages: 2 (579 words) Published: May 8, 2011
All LEDC debt should be written off because it is stopping them develop. Many LEDCs find it difficult to develop and invest in long-term improvements such as education, since they have fallen into a cycle of debt, a debt trap. An LEDC fall into a debt trap by borrowing money from either rich countries or international banks such as the World Bank or the IMF, International Monetary fund. They borrow this money to help build roads and factories. They are often encouraged to do this by the banks or rich countries themselves.

LEDC may then spend this money unwisely and then suddenly find that the loan that they had agreed on had a variable interest rate that had gone up since they started paying of the interest on the loan. They may find themselves unable to repay either the interest or the original sum. The country still needs to develop and therefore borrows more money to try and pay of their original debt and develop their country further. The LEDC then finds that it is locked in a debt trap. The country then only invests in projects that will it money and does not invest in long-term projects. This often leads to environmental damage such as deforestation.

Many MEDCs such as the UK now agree that most LEDCs indebted to them cannot afford to repay the loan and the interest on it. Some counties have agreed to cancel all the LEDCs debts. As long as they agreed to spend their extra money on the poorest in their country. This means that they can spend more money on what the majority of their people want.

All LEDC debt should not be written off because the creditors (the people who loan money to LEDCs) such as international banks and rich countries will not see a return on there money. The loan is turned into a grant, a loan of money, which they do not have pay interest on or pay back. To see a return on their money they could freeze the country’s debt and tell them to pay them back at the end of a period of time during which they had developed be able to pay...
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