Th4.3: OS - Debt Relief

Question 1

How do many countries suffer from the high interest repayments to loans they have taken out?

Answer 1

it limits the growth of some of the poorest countries, whilst being relatively small for the countries and agencies they are owed the money

Question 2

What are the benefits of debt relief?

Answer 2

it will ease government finances and allow more money to be spent on provision of services and infrastructure to aid development - loans aren’t too big so can be written off!

Question 3

What are the issues with debt relief?

Answer 3

it causes moral hazard because it creates a precedent - every poor country may now expect to receive debt relief. it also eases pressure on weak governments to adopt reforms and good economic policies