Debt Crisis: A Major Developmental Issue in the Third World Countries

The debt crisis in the third world countries has been a major obstacle to human and economic development.

Debt crisis implies the external debts of both private and public of developing countries which has been growing intensively since the 1970s.

The magnitude of the debt problem is truly amazing. In the 1970s, the total debt of developing countries was $70 billion. In 1982 it increased to $850 billion. By the 1990s, it had risen beyond the $1 trillion mark. Some Southern countries spend as much as 40% of their annual income on debt servicing.

Debt crisis has impeded sustainable human development, security, political and economic stability, and conducive atmosphere for the realisation of highest potentials.

Debt crisis in the third world countries is  as a result of several factors. There are several internal and external factors that increases debt crisis in the third world countries.

The internal causes of debt crisis are:

1. Unrealistic elephant projects.

2. Corruption and Mismanagement of economy.

3. Poor governance.

4. Weak Financial Institutions.

5. Weak Legal Institutions.

6. Infrastructural Problems.

The external causes of debt crisis are:

1. Legacy of colonialism.

2. High conditions on loans from IMF and World Bank.

3. Global economic recession.

4. Fluctuation of oil prices.

The above highlighted factors have greatly facilitated debt crisis and has hindered human development and socio-economic stability in the third world countries.

The effects of debt crisis has also created a dependency relations and reduction in the revenue of third world countries.

Series of structural adjustment programmes embarked upon by the third world countries have resulted in poverty, deteriorating health conditions, economic instability and poor living conditions.

However, there are several ways by which third world countries can surmount the issue of debt crisis. They are:

1. By debt relief

2. By debt Pardon

3. By establishing strong Institutions in the third world countries.

4. Through reduction in the interest rate on loans by the Bretton Woods Institutions.

5. Through technological innovations in the third world countries.

In conclusion, the issue of debt crisis has been a major obstacle of human development, political and economic stability in the third world countries. It requires both internal and external approach in order to address the issue of debt crisis in the third world countries.

                                  By:
                                  Durodola Tosin Samuel