2. • A contractual agreement
in which a borrower
receives something of
value now and agrees to
repay the lender at some
date in the
future, generally with
interest. The term also
refers to the borrowing
capacity of an individual or
company.
3. CREDIT AND DEVELOPMENT
• Inadequate funds have prevented many
poor countries from accelerating the pace
of their economic development. Taxes and
other sources of government incomes are
not enough to finance all their basic
programs of development.
4. Poor
Countries
• Since local financial resources are not
enough, foreign loans are indeed to speed
up the development of the poor countries.
5. FOREIGN LOANS, NOT FOREIGN
INVESMENTS
• For an undeveloped country, more money
means more investments and production.
And these speed up economic activities.
However, if such capital belongs to the
foreigners, naturally the profits go to them.
• Society may appear affluent and
progressive, but this is not real in the sense
that wealth and income belong to the
foreigners.
6. THE ROLE OF WORLD BANK
• The leading nations of the
world met at Bretton
Woods, New Hampshire in
1944 to organize the
International Bank for
Reconstruction and
Development (known as
World Bank).
7. MAIN OBJECTIVE OF WORLD BANK
To extend long-term
loans for reconstruction
and development,
especially to the less
developed countries
that cannot secure
private loans at
reasonably low interest.
8. Some features of the World Bank are:
1. Its loans are limited to agricultural
productions.
2. Many of the Bank’s loans are channeled
into development project such as multi-
purpose dams, irrigation projects, health
and sanitation programs, and
transportation and communication
facilities.
9. 3. The bank has been active in providing
technical assistance to underdeveloped
nations. It assist such countries in
discovering avenues of growth that are
most suitable to their economic
developments.
4. The primary thrust of the World bank is
rural development.
10. INTERNAL DEBT
• The government sells bond to acquire
more funds for its various programs and
projects. By selling bonds, the
government becomes debtor to those
who brought bonds. Bondholders will get
their money back plus interest after the
prescribed maturity period
11. MOST CREDITWORTHY COUNTRIES
1. United States of America
6. Russia
2. China
7. Brazil
3. Japan
8. United Kingdom
4. India
9. France
5. Germany
10. Italy
12. BIGGEST DEBTOR COUNRIES
6. Bangladesh
1. India
7. Kenya
2. Vietnam
8. Uganda
3. Tanzania
9. Democratic Republic
4. Ethiopia
of Congo
5. Nigeria
10. Ghana
13. NEGATIVE SIDE OF PUBLIC DEBT
1. It leads to wasteful government
spending.
2. It creates inflation.
3. It burdens future generation.
4. It dampens production of goods and
services.
5. It reduces future consumption and
saving.
