African Debt Crisis

This never-ending cycle of debt is the reality for most, if not all of Third World countries. In the 1970’s, Western banks loaned out huge sums of money to Third World nations with the intention of one day making profit. And they succeeded.

The IMF and World Bank providing loans to impoverished and financially unstable countries is not only irresponsible, it's unethical. I intend to use the example of the loans provided to Mexico during the Mexican peso crisis, also called the Tequila crisis or December mistake crisis to illustrate this, and then provide what I believe would be a better solution

International institutions reflect the interests of core capitalists and therefore do not essentially alter the economic positions of core and periphery countries. Global institutions and organizations are usually created by core countries and often refrain from undermining the authority of the core. Instead, IGOs and NGOs tend to perpetuate the power of the core by encouraging policies that align with the interests of wealthy countries and consequently exacerbate underdevelopment in peripheries. A significant example of mistreatment against Chile is the debt crisis it faced since the late 1900s. The USA and lending agencies such as the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) declined

Developing countries spent years repaying billions of dollars in loans, many of which had been accumulated during the Cold War under corrupt regimes. Years later, these debts became a serious barrier to poverty reduction and economic development in many poor countries. Governments began taking on new loans to repay old ones and many countries ended up spending more each year to service debt payments than they did on health and education combined. Wealthy countries and international financial institutions have taken action to relieve debt burdens in many of the world’s poorest countries – primarily through the ‘Heavily Indebted Poor Country’ (HIPC) scheme and the ‘Multilateral Debt Relief Initiative’ (MDRI) (see below) – but debt burdens are still a problem.

Ever since organizations and agreements like the North American Free Trade (NAFTA) and the International Monetary Fund (IMF) were created around the end of World War 2 to supposedly help the Third World nations to establish better economies and governments, they have only done more harm than good for these nations. These third world countries end up becoming exploited and extorted, forced to become dependent on the big international organizations like the IMF because of the exorbitant interest rates charged on them, thus they remain forever in debt. The accumulation of debt then allows the IMF to have more voice over how the indebted countries should be shaped and how they should run their economy. What ends up happening then is that their

In the documentary, Christopher Guldbrandsen reveals how Glencore, which is a Swiss company, is making billions of money from copper mining in Zambia. As they do this, the country remains among the poorest in the world. Nobody will be surprised to learn that World Bank and IMF were involved in the business of the mines that later led to the current situation. Many people ask themselves as to when the African countries will stop taking pieces of advice from such institutions. The policies recommended by such institutions have been disastrous for Africa and all other developing nations in other continents. The practice results in a continuous transfer of wealth to the north from the south. Why is the IMF controversial? It is such a pity that the IMF has even tried pushing its policies on China.

Both internal and external for Latin Americas roller coaster economic performance in what was known as the crisis. During the 50’s and 60’s there was favorable conditions in place to maintain steady employment creation, capital investment and overall economic expansion. But this period ended in 1973 amid the first world oil crisis rocked the world economy and caused an era of debt-led growth among the oil importing Latin America countries. Latin American countries were hit by a slow down in economic growth. The import bill in these nations sky-rocketed and exports saw a massive slump as demand for Latin American products fell abruptly as the world economy slowed down. When a second oil price

The Global Banking Financial Crisis 's and Its Impact on Developing Nations: Case Study Africa

far from being the solution to global economic instability and poverty, these two international institutions are a major problem. For one thing, their lending practice deters growth because the money they loan removes incentives for governments to advance economic freedom, and breeds corruption. For these reasons, the vast majority of recipient countries have been unable to develop fully after depending on these institutions for over 40 years.2

Currently there are two international financial institutions which sought of undertake this role, the International Monetary Fund and the World Bank. The goals of the World Bank are for long term development in countries to reduce poverty by improving a countries investment climate and training its people.[1] The IMF was establish to promote international monetary cooperation, exchange stability, to foster economic growth with high levels of employment, and to provide temporary financial assistance to countries to help ease balance of payments adjustment. Both organisations can provide immediate funds to stabilize countries economic crises[2] but their aims are for the long-term health of the economy and not the immediate soothing of shocks with financial remedies. Their solutions tend to very painful for the citizens of the countries affected and do not

Some international development banks have been blamed for imposing policies that ultimately destabilize the economies of recipient countries.

The IMF is one of a number of international organizations whose work is aimed at preventing economic crisis and rebuilding economies. According to the Levin Institute, both the IMF and the World Bank were started after WW2 in response to concerns about the stability of economic markets around the world. While the World Bank now has a focus projects and sustainable development, the IMF is primarily focused on fiscal policy with lending practices that are focused on crisis management. Loans that come with significant conditions attached, including significant changes to fiscal and monetary policy in the borrowing nation (Levin, n.d).

The three major international economic institutions are the International Monetary Fund (IMF), the World Bank and the World Trade Organization; this book mainly focuses on the IMF and the World Bank, due to the author’s first-hand experience with both institutions. The IMF, a public institution built as a guiding hand for economic stability around the world, has brought false

Furthermore, critics say; “the IMF frequently argues for the same economic policies regardless of the situation.” (Pettinger, 2008) The IMF blindly imposed the same “conditionality’s” to all its loans. What policies might have worked for one country might make matters even worse in others.

To begin, cities within the global south are more likely to need aid from the IMF. The United States currently holds 1/3 of the votes within the IMF, as a result the decision making power over nations within the global south rest in the hands of the western world. This dynamic is problematic because the IMF’s, SAP’s programs only add to further economic and social resource depletion within developing cities. With little to none voting influence from persons within the global south, the “west” through the IMF will continue structuring loans from an “outsider” perspective. As an “outsider” the west is given control over people and resources in the developing world.