World Debt Facts
When developed countries think of world debt they tend to think of the underdeveloped third world and the extreme poverty that exists there. In reality, debt is a global phenomenon from which no government has escaped. Debt is a fact which varies only by its size and speed of escalation in various countries worldwide.
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Debt Relief in Poorer Countries
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The International Monetary Fund (IMF) recognized that poorer countries were deeply in debt to developed countries, and that poverty relief could only be accomplished if external debt was reduced or excused altogether. In 1996, the International Monetary Fund and the World Bank joined forces to form the Heavily Indebted Poor Countries (HIPC) initiative to ensure that no country faced unmanageable debt. Since 1995, debt reduction has been approved for 35 countries, 29 of them in Africa. In 2005, the HIPC initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI) which used the resources of the IMF, the World Bank and the African Development Fund to excuse debt.
The HIPC Process
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The poorest of countries are offered assistance. To qualify for help through HIPC, a country must be committed to debt reduction and maintain a good fiscal record. Interim debt relief is offered first, then full debt excuse becomes possible for qualifying countries. Countries must be eligible to borrow interest-free grants and loans from the International Development Agency operated by the World Bank and from the International Monetary Fund's Extended Credit Facility which offers loans at reduced rates. A country's debt load must be insurmountable through any other means, and the country must have demonstrated economic reform policies and good business practices to be granted assistance.
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International Economics
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The world's developed countries have no program in place for the reduction or elimination of debt. These countries buy and sell from one another in a delicate balance of trade. Countries also lend among themselves, creating situations where one country holds the debt of another, earning interest on the transaction as a banker would with a customer seeking a loan. This situation gives rise to a global imbalance which could prove disastrous if a lender were to seek power over a borrowing country.
Where the G20 Countries Stand
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An analysis of debt in the G20 nations, expressed as a percentage of their growth domestic products, reveals an alarming trend: A comparison of percentages from 2007 to those of 2010 show an increase in debt load for all but Saudi Arabia. The U.S. debt percentage has increased from 70 percent of its GDP to almost 100 percent in the last three years alone. Japan's percentage is currently the highest, at 235 percent of their GDP versus just below 200 percent in 2007. Russia shows an almost immeasurable change, while Australia is up from 10 percent to more than double that amount. The other G20 nations also show an escalating debt load.
What Can Be Done?
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Credit and debt is crippling us globally. The concept of a balanced budget seems to have been lost in today's global economy. Government debt reflects the spending habits of a consumer society out of control. Economic reform is necessary and well overdue.
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References
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