Debt Crisis in Developing Countries Essay Example | Topics and Well Written Essays - 3000 words

Debt Crisis in Developing Countries - Essay Example all the same despite the many hassles associated with developing countries it is still possible to solve the debt problem and to attain high levels of development, this weed be done through well laid strategies that involves all the sectors in an economy and this go forth be analyzed in this paper.Debts in developing countries have appendd over the years, many factors have caused this increase in debts including unfavorable footing of trade, rising internationalistic touch rates, increase protectionism in the international market, loose tallying by international finance organizations and the rescheduling of punitive terms where countries delay repairment.2The above mentioned factors are immaterial factors and that there exist internal factors that have led to the increased problem of debts include economic mismanagement, unsustainable authorities deficits and the maintenance of unrealistic exchange rates. All the above factors have led to the increased debt problem in developed countries.3As a result of unfavorable terms of trade countries are faced with the problem of balance of payment, developing countries mainly export agricultural goods and in turn import machinery and electric goods, the cling to of imports in most cases exceeds the value of exports and as a result the increasing debt problem, countries are faced with an increasing balance of payment which lead to rising debts.Rising international interest ratesMost international finance institutions pass on raise their interest rates which in most cases affect developing countries, for framework a demesne may obtain funds from a financial institution but the country may face increasing interest rates on the loan which will increase the pay back value where in most cases the country may end up paying more than than double it acquired from the institution, therefore this has added to the problem of debts in developing countries.Increase d protectionism in the international marketincrease protectionism in the international markets has led to an increase in the debt problem in the developing countries, most of the products produced in developing countries are exported to developed countries, when the products are faced with high levels of protectionism in the developed countries the developing countries will experience a reduction in exports leading to unfavorable balance of payment, this means that the country will experience debt problems.Irresponsible lending by finance institutionsFinancial institutions will lend money to countries without fetching into consideration the current state of an economy, a country may receive a lot of funds which will end up not being used for their intended purpose, finance institutions will lend the developed countries large sums of money and also they lend money even before previous payments are not yet complete leading to the increased debt problem in the developing countries.Res cheduling of payment termsFinancial institutions will change payment terms over time and this may end up increasing the debt problem in developing countries, such terms include the increase in interest rates, the delay of payments has also led to the increasing debt problem in d