Debt Trap Of The Developed Countries Exposed!!!!

Requests from the poor countries for a comprehensive package of debt relief to help poor countries cope with the corona virus pandemic have intensified after research by JDC (Jubilee Debt Campaign) showed that more than 60 including the most poorer countries are spending more on paying their creditors than they are on health even when there is a grave health crisis. This is due to the high borrowing of the poor governments and high interest on the loan.

  • The Situation Of World Economy :

  • The World has been greatly affected by the Coronavirus Pandemic and its effects as a whole. Due to the global lockdown, the demand-supply chain has been almost completely destroyed. Even the countries with the most advanced economies are now starting to feel the heat of this situation.

     

     The prices of gold are going up. Oil prices are in a downward projection. Oil prices even reached negatives prices dues to lack of demand and storage. Many most developed countries have faced the repercussion of Coronavirus including China.


     But due tobetter health facilities and better living standards, they are more prepared toface the Pandemic than the poor countries. Plus they don't have the debt trapupon them. The debt trap is now showing its effects, especially on poorcountries.
  • Situation of the Poor Countries:

  • The coronavirus outbreak threatens to disproportionately devastate the economies of already impoverished countries as they gear up to tackle a health crisis with extremely limited resources, the United Nations Development Programme (UNDP)has warned.

    The socioeconomic hit on poor and developing countries will take years to recover from, UNDP said in a report released on Monday, stressing that income losses in those countries are forecast to exceed $220bn. Nearly half of all jobs in Africa could be lost, it also warned. 

    The sad part is that the most vulnerable countries to COVID 19 are the poorest countries. And the worst part is that they are using more their resources in debt servicing than on health system. For example, there are countries in the world that have ventilators not more than 10 but they are paying their Intereston time.

    "Poorer countries will take the hardest hit, especially ones that were already heavily indebted before the crisis," the World Bank's President David Malpass,told the International Monetary and Financial Committee, the steering committee of the IMF.

    The most hard-hit regions would Africa and Asia where are a great number of daily laborers and these cant even afford to eat 2 times a day. How would they afford masks and hygiene products? Due to lockdown, these people are now striving for1-time food.

    Now comes those countries which have oil and agriculture-based economies. These countries are badly damaged by the COVID 19. As the demand for Oil products decreases and oil storages are full, as a result, oil prices are sharply decreasing. Even the export of perishable items is not occurring due to the global lockdown amid the Coronavirus Pandemic. As a result, these countries face a sharp decline in export and as a result, unemployment increases in these countries.

  • The Debt Trap:

  • Definition:
    A debt trap is a situation in which a borrower is led into a cycle of re-borrowing, or rolling over, their loan payments because they are unable to afford the scheduled payments on the principal of a loan. These traps are usually caused by high-interest rates and short terms.

    The debt trap is used by Developed Countries:
    1.  The debt trap diplomacy is famous for China because the west accuses China to use this to vest its own interests.
    2. But the fact is that all the developed countries use this so that less developed cant think about its own people and that these countries would do what the developed countries say.
    3. It's more of a master-slave relation.
    4. The country which has borrowed the money does what is best for the giving country. Thus through these loans, he developed countries can influence other less developed countries.
    5. The interest on the borrowed amount is also a source of income for the developed countries. According to research, debted countries are investing more in debt payment and servicing than on Health.
    6. The last most important point that even though the great G 20 have shown great humanity by deferring the payments due in 2020 but the fact is that the debted countries would have to double pay in 2021 or 2022. They are further giving loans to already debted countries which means that developed countries are providing short term relief.

  • Sources:

    1. https://www.aljazeera.com/ajimpact/developing-countries-face-economic-collapse-covid-19-fight-200330003332689.html
    2. https://foreignpolicy.com/2020/03/10/the-multilateral-health-system-failed-to-stop-the-coronavirus/
    3. https://www.undp.org/content/undp/en/home/news-centre/news/2020/COVID19_Crisis_in_developing_countries_threatens_devastate_economies.html
    4. https://www.theguardian.com/commentisfree/2020/apr/27/economy-recover-coronavirus-debt-austerity
    5. https://www.theguardian.com/business/2020/apr/12/pressure-grows-for-developing-world-debt-relief-over-coronavirus


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