Unmanageable Third World debt

(Ref. 703)
Problem Components
Policy issue area: World
Policy issue: Economy
Description: Inability of less developed countries to repay/manage their huge debt load ($1.25 trillion).
Symptoms: Hundreds of billions of dollars in loans are in danger of default; countries cut back imports from the United States and try to increase exports, causing loss of jobs (up to 1 million); global economic growth is slowing.
Causes: World-wide recession; lagging/hampered world economic development.
Cost of problem: -
Solution Components
Resources: International financial institutions; governments and financial institutions of industrialized countries.
Goal: Provide assistance to Third World nations to restructure existing debt, and spur both recovery and expansion of their economy.
Program area: World economic development
Program-remedy: 1. World Bank or other supranational financial institution empowered to discount bank loans in exchange for long-term bonds
2. Programs for exchanging debt for equity in local businesses
3. Debt forgiveness for the least viable economies.
Program-prevent: Long-term program of world economic development strategy and aid.
Cost of program: -
Beneficiaries: Economies and populations of the less developed countries.

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