Third world debt problems are becoming a huge issue these days. Many economic analysts and politicians worry that the current recession will lead to even more Third World debt issues. Some say it is time for the developed world to come to their aid. However, some economists and others believe Third World countries should continue to rely on what they have available to them. In the end, it is up to the individual to do what they think is best for the economy.
There is much discussion as to whether the rich, first world nations should hand over money that needs to be paid back. Many of the so-called “developed” countries feel that the Third World should get more assistance from the outside. The Jubilee Debt campaign offers six reasons as to why the third world debtors should cancel their loans. Firstly, many governments wish to invest more money in economic development but then they lose this money in paying their loans back. Secondly, many governments feel that debt relief programs are a way of encouraging illegal activities by the Third World.
Thirdly, many of the so-called “developed” countries like the U.S. have a problem with the exchange rate of their currency versus that of the currency of the third world debtor. Some say that this can actually make the debtor an easier prey. It would be good if the developing countries could fix a fixed exchange rate so that the creditors have something to look forward to. One reason why this might happen is that a fixed exchange rate makes the creditor agrees to write off a part of the debts. The amount depends on the level of debt, how long it is due and other factors. Some economists believe that a fixed exchange rate should not be brought into effect until all Third World countries have completely recovered from their recent economic problems.
Many foreign banks and lending institutions had refused to lend money to third world countries in the past because they did not believe them to be able to pay their debts. This has caused a severe shortage of capital for these companies and has reduced their ability to create jobs. The developing countries have no other choice than to resort to accepting lower payments in order to continue making their monthly payments.
A solution has been proposed by the United States government. The US government is ready to negotiate with the creditors of third world countries in order to establish a reasonable program that will help these countries to pay their debts. This program should involve a reduction of the interest rates. These negotiations will start immediately. It is expected that banks and lending institutions will be approached by government officials in order to help these countries. US Treasury Secretary Tim Geithner has already said that the United States will offer $40 billion to these developing countries.
There are many reasons behind the increasing problems faced by third world countries in meeting their monthly payments. Some of these countries are facing severe natural disasters, thus their income from tourism is low. Moreover, the developed world’s large banks prefer to lend money to these countries through loans. These countries are unable to pay these loans as they have low reserves and hence need outside assistance to meet their expenses.
The World Bank believes that the negotiation process can help these third world countries to eliminate their debts. It is also hopeful that the creditors will agree to reduce the interest rates applicable on the debts of these countries. Negotiations are likely to result in a reduction of the debt by up to fifty percent. The negotiations between the developed world and the developing world will be followed by another round of negotiations expected to result in another reduction of the debts of these countries.
This would be good news for the third world debtors because it means that they will only have to pay half the amount or less than half of their total liabilities instead of the entire amount. However, this is not going to be possible unless the governments of these third world countries are able to secure more financial assistance from the developed countries. If you want to settle your debts without hiring a debt settlement company, then you can get in touch with your respective creditors. Let them know that you are planning to go for debt relief and that you are willing to pay at least fifty percent of the total amount to settle your debts, but if your negotiations are unsuccessful, then you have the option of filing for bankruptcy.