Causes, nature and problems of debt

Question 1

Causes of debt:

Answer 1

Oil crisis in the 1970’s caused a rise in prices which meant LIC’s needed to borrow more
Large Sums of money were borrowed from western banks to invest in industrial development after independence from colonies.

Significant fluctuations in exchange rates can affect weak currencies, causing the price of the debt to increase

Question 2

Nature of Debt:

Answer 2

an increase in poverty results trapping those most impoverished in a negative feedback cycle which reduces a countries development

Foreign and Private investment becomes reduced

Question 3

Problems of debt:

Answer 3

Borrowed money was used to benefit the ruling regimes of the government

there was a lack of investment in health of education which resulted in reduced literacy and poorer health