No macro economic problem is as complex as public debt. The most distressing, that deprives even the basic amenities (health & education) to its people. According to the United Nations Programme for development, many countries spend a greater proportion of their budget on debt repayment than they allocate to education, health and other social services. In 2001, 38% of the budget in African countries was devoted to debt servicing.
Malawi with a Debt to GDP Ratio of 235.70% and Tanzania with 6.1% ranks first and last respectively among the 106 most indebted countries in the World for the year 2004. India ranks 43 rd position with an estimated public debt of 59.70% of its GDP. The debt crisis is echoed in the US and throughout Europe. Under George Bush’s Presidency, the national debt has risen by 34% which is 64.8% of GDP. Several financial crises in the past decade in large emerging markets (Argentina, Brazil, Mexico, Russia and Turkey) were triggered by Public debt.
The first debt relief campaign for heavily indebted countries was initiated under the banner Jubilee 2000 an outfit consisting of development NGOs, Christian organization and others. Its intense campaign in 1999 involving the Pope, Bill Clinton, Tony Blair and Bono, compelled the G8 leaders to write off $110bn of debt for 41 of the world’s poorest countries.
Recently, a unique way to get global attention to this burning problem has been tried out for the first time by releasing a musical CD. The CD titled “Drop the Debt” was released by the World Village (Harmonica Munds) on August 12, 2003 to raise awareness and funds for an international effort to cancel the debt that burdens the development of the “developing nations”. Leading singers have rendered songs with heartening catchy word like “You paid me only 10 and I retuned 100” to gain the sympathy of the lenders. Another debt relief organization that works closely with debtor governments and helped in writing off millions of dollars of debt of countries like Nigeria, Ethiopia and Guyana is Ann Pettifor’s “Advocacy International”. All these shows how vital needs of the populations are being sacrificed to truncated economic rules and necessitates a change in the World Debt policy.
The traditional reason for public debt in many countries is excessive domestic spending. The concern is enormous borrowing to finance this spending. While corporate borrowing can be sustainable, as it is used for business expansion and the significance of profits and market value for its shares can be expected to channel the borrowed funds into productive use, the sustainability of the level of indebtedness of the Government is of great concern to the policy makers, as it leads to macroeconomic instability.
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PDF Ebook Reducing Public debt Is it a realizable objective of Privatization?
