Role Of International Debt

Question 1

What is a domestic source of financing growth and development

Answer 1

Savings from the domestic private sector e.g. households and businesses. Tax revenues also.

Question 2

What is an external source of financing growth and development

Answer 2

• overseas development assistance
• loans
• private external finance e.g. FDI

Question 3

What is external debt

Answer 3

Debt owed by governments, household and businesses in a country to external (overseas) creditors

Question 4

Examples of external debt

Answer 4

Government bonds

Question 5

What is the scale of external debt measured as

Answer 5

A % of a country’s GNI

Question 6

Negative impact of persistent trade deficits on less developed countries

Answer 6

End up spending lots through the government = high fiscal deficits

Question 7

What does the Jubilee Debt Campaign suggest

Answer 7

Serb cancellation and debt relief avoiding where possible conditions built into debt reduction agreements that create further problems for vulnerable countries

Question 8

What is the Heavily Indebted Poor Countries Initiative

Answer 8

An initiative to provide debt relief to heavily indebted low-income countries

Question 9

Advantages of remittances for families in LDCs

Answer 9

• disposable income
• helps investment in land, seeds and livestock
• lower risk of extreme poverty

Question 10

Macroeconomic advantages of remittances for LDCs

Answer 10

• lower Gini coefficient
• higher productivity
• help absorb the impact of external economic shocks
• key source of foreign exchange
• inflow on currency account of BoP

Question 11

Risks / disadvantages of remittances for LDCs

Answer 11

• high cost of money transfers
• LDCs may not have access to banking services
• reduced workforce due to outward migration of skilled workers
• inflow of remittances can cause appreciation of XR (damaging competitiveness)
• households receiving remittances may decide to remain inactive