Examine The Role Played By Debt In Maintaining A Global Development Gap

Topics: World Bank, United Nations, Human Development Index Pages: 1 (352 words) Published: March 25, 2015
Examine the role played by debt in maintaining a global development gap (15) The Development Gap refers to the widening difference in levels of development between the world's richest and poorest countries. Uganda is one of the worlds most poor nations, with a HDI of 5.05 and a PPP of $1455. In the 1970s, OPEC members banked their earnings in Western banks, money became available to lend to developing countries for projects – often to finance conflict and to keep regimes in power. Idi Amin came to power in Uganda in 1971. The wealthy Asian community was expelled, meaning a loss of assets, which led to the collapse of government tax revenue. Therefore, large-scale borrowing was required to maintain government spending and finance weapons. The situation persisted until Amin was overthrown in 1979. Due to the doubling of global interest rates in the 1980s, the country got into debt and was unable to meet its repayment. This unpaid interest was added to the original loan amount and by 1992, the country had $1.9 million worth of debt. Ugandas land is fertile with good resources and a population of about half the UK’s within the same land area yet Uganda’s HDI rating is 0.505 in comparison to the UK’s 0.946. Furthermore, Uganda’s GDP per capita (PPP$) in 2005 was $1454, just 4.4% of the UK’s $33,238. Debt evidently affects a country’s development and plays a significant role in maintaining a global development gap. In conclusion to this, debt has played a large factor in maintaining the development gap. The HIPC however is a program launched by the IMF and resulted in over $40 billion of debt being wiped from the poorest 36 nations, Including Uganda. The IMF also introduced the SAP (Structural Adjustment Program) where advisers were sent in to assist the government in helping the nation develop as well as to create a repayment strategy. Debt may be a key factor in the development gap, however there is an effort being made to abolish this debt, so there is a effort in...
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