To finance development, many poor countries have to take recourse to external loans. By itself this is not bad or dangerous because the debt can be used to , f. i., invest in infrastructure, raising the output of the economy.
But if loans are taken and given without considering the economic capacity of the debtor, the repayment could become a problem. In the 1970s and 1980s this led to the so called “Third World Debt Crisis”. Today we can observe a similar trend: Poor countries in Africa, Asia and Latin America have comparatively easy access to fresh money because low interest rates in the Global North make investments in the Global South very attractive.
Rules for responsible borrowing and lending are important since they make clear, that creditor and debtor share responsibility for the success of the lending operation.
New Analysis: The Tunisian debt crisis in the context of the COVID-19 pandemic: Debt repayments over human rights?
At the beginning of the pandemic in spring 2020, it was not so much the health crisis, which hit developing countries like Tunisia hard. While Europe and the US struggled with the health impact of the pandemic, it was the global economic impact, which devastated the Tunisian economy. In April…Mehr lesen ...
In recent years, the effects of the climate crisis, exacerbated since March 2020 by the impact of the coronavirus pandemic, have graphically highlighted what it means for heavily-indebted countries to be hit by external shocks. While the international debt architecture has responded, nevertheless, little has changed in terms of its…Mehr lesen ...