Third World debt

Unpayable debt is a term used to describe external debt where the interest on the debt exceeds the amount that the country produces, thus preventing the debt ever being paid back. It is considered by some a method of oppression or control by first world countries; a form of debt bondage on the scale of nations. First world critics of this point of view state that many of these debts were freely entered into by those countries' governments; it has, however, been argued that many of these governments were dictatorships or kleptocracies, and that the people of Third World countries cannot be held responsible for the actions of those governments.

Activists state that the debts of poor countries could easily be paid off by first world countries. For example, the Jubilee Debt Campaign argues that the UK could pay off all of the debt owed to it for £3 per person per year for the next ten years.

Some economists argue against this course of action on the basis that it would motivate countries to default on their debts, or to deliberately borrow more than they can afford, and that it would not prevent a recurrence of the problem. Perhaps as a result of these considerations, there is little political will to do this.

In 2004 the United Kingdom wrote off some of its third world debt to the poorest countries. As part of its response to the humanitarian crisis caused by the Indian Ocean earthquake, the G7 nations organized an international agreement to suspend repayment of international debt by the countries most affected. [1]

See also