Credit and development
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The document discusses credit and development, specifically how foreign loans can help speed up economic development in poor countries. However, if the capital comes from foreigners, then the profits will go to them rather than benefiting the local society. It also describes the role of the World Bank in providing long-term loans to less developed countries for projects like infrastructure and agriculture. The World Bank aims to support economic growth in a way that is suitable for each country's situation.
Credit and development
- 2. • A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.
- 3. CREDIT AND DEVELOPMENT • Inadequate funds have prevented many poor countries from accelerating the pace of their economic development. Taxes and other sources of government incomes are not enough to finance all their basic programs of development.
- 4. Poor Countries • Since local financial resources are not enough, foreign loans are indeed to speed up the development of the poor countries.
- 5. FOREIGN LOANS, NOT FOREIGN INVESMENTS • For an undeveloped country, more money means more investments and production. And these speed up economic activities. However, if such capital belongs to the foreigners, naturally the profits go to them. • Society may appear affluent and progressive, but this is not real in the sense that wealth and income belong to the foreigners.
- 6. THE ROLE OF WORLD BANK • The leading nations of the world met at Bretton Woods, New Hampshire in 1944 to organize the International Bank for Reconstruction and Development (known as World Bank).
- 7. MAIN OBJECTIVE OF WORLD BANK To extend long-term loans for reconstruction and development, especially to the less developed countries that cannot secure private loans at reasonably low interest.
- 8. Some features of the World Bank are: 1. Its loans are limited to agricultural productions. 2. Many of the Bank’s loans are channeled into development project such as multi- purpose dams, irrigation projects, health and sanitation programs, and transportation and communication facilities.
- 9. 3. The bank has been active in providing technical assistance to underdeveloped nations. It assist such countries in discovering avenues of growth that are most suitable to their economic developments. 4. The primary thrust of the World bank is rural development.
- 10. INTERNAL DEBT • The government sells bond to acquire more funds for its various programs and projects. By selling bonds, the government becomes debtor to those who brought bonds. Bondholders will get their money back plus interest after the prescribed maturity period
- 11. MOST CREDITWORTHY COUNTRIES 1. United States of America 6. Russia 2. China 7. Brazil 3. Japan 8. United Kingdom 4. India 9. France 5. Germany 10. Italy
- 12. BIGGEST DEBTOR COUNRIES 6. Bangladesh 1. India 7. Kenya 2. Vietnam 8. Uganda 3. Tanzania 9. Democratic Republic 4. Ethiopia of Congo 5. Nigeria 10. Ghana
- 13. NEGATIVE SIDE OF PUBLIC DEBT 1. It leads to wasteful government spending. 2. It creates inflation. 3. It burdens future generation. 4. It dampens production of goods and services. 5. It reduces future consumption and saving.