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Chapter 9: Problem 5

What is meant by the debt crisis of the developing world? What is being done to help resolve this crisis?

Short Answer

Expert verified
The 'debt crisis' of the developing world refers to when they are unable to pay back foreign debt. Efforts to resolve this include initiatives like the HIPC Initiative, roles of IMF and World Bank, and agreements like the Paris Club which often involves debt rescheduling. However, further measures like responsible lending and borrowing, better crisis management, and fairer globalization are still needed.

Step by step solution

01

Explaining the Debt Crisis in the Developing World

The 'debt crisis' of the developing world refers to the situation where developing nations are unable to pay back their foreign debt to the external creditors. This could be due to various reasons such as poor economic management, global recession, external shocks, and harmful policies of international financial institutions.
02

Identifying the Challenges

Such nations face challenges including low income, lack of development, loan dependency, etc. Their debt crisis often results in further poverty and inequality, and hinders their economic development.
03

Resolving the Debt Crisis

Various efforts are underway to help resolve this crisis. Such as the roles of International Monetary Fund and World Bank, HIPC Initiative, Paris Club agreements, etc. For instance, under the HIPC Initiative (Heavily Indebted Poor Countries), debt relief is given to the poorest countries, enabling them to reach the Sustainable Development Goals. Paris Club agreements often involve rescheduling the debt, making terms more favorable for the debtor nation.
04

Current Situation and Perspectives

Further measures are still needed to prevent such crises in the future. These may include more responsible lending and borrowing, better crisis management, fairer globalization, etc.

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