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The case for such debt cancellation includes the following points….

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Debt cancellation allows LEDC’s to use funds that would have been spent on debt servicing and capital repayments in ways which will instead foster their own development, such as investment (to encourage economic growth) and measures to alleviate poverty. Campaigners often argue that debt cancellation is a moral duty because of the role it can play in reducing poverty and unnecessary deaths.

Debt cancellation can be tied to conditions, and these conditions can be drawn up to encourage development. Such conditions might include evidence of low levels of corruption in government, for example. These conditions provide an incentive for more countries to achieve the ‘good governance’ that helps to stimulate economic growth.

The breaking of ‘cycles of debt’. Many debts are services or repaid simply through further borrowing and debt tends to increase over time. This cycle must be broken at some point or development will be very hard to achieve.

The fostering of development through debt cancellation may be in the long term interests of developed nations. Once development has occurred, for example, bigger markets will exist for the exports of those nations already developed. There is also a link between poverty, disease and, more controversially, terrorism, which can all impact on developed nations.

Correct answers

Debt cancellation allows LEDC’s to use funds that would have been spent on debt servicing and capital repayments in ways which will instead foster their own development, such as investment (to encourage economic growth) and measures to alleviate poverty. Campaigners often argue that debt cancellation is a moral duty because of the role it can play in reducing poverty and unnecessary deaths.

Debt cancellation can be tied to conditions, and these conditions can be drawn up to encourage development. Such conditions might include evidence of low levels of corruption in government, for example. These conditions provide an incentive for more countries to achieve the ‘good governance’ that helps to stimulate economic growth.

The breaking of ‘cycles of debt’. Many debts are services or repaid simply through further borrowing and debt tends to increase over time. This cycle must be broken at some point or development will be very hard to achieve.

The fostering of development through debt cancellation may be in the long term interests of developed nations. Once development has occurred, for example, bigger markets will exist for the exportsof those nations already developed. There is also a link between poverty, disease and, more controversially, terrorism, which can all impact on developed nations.

Complete the activity below. Drag the words to the correct spaces.

Your answers

The policy of debt cancellation is not without its critics, however. Counter-arguments include….

Debt cancellation may encourage Irresponsible borrowing in the belief that the debts incurred may never have to be repaid.

The cancellation of debt comes at a cost to firms and governments in the developed world to whom the money was owed. For example, the use of public sector money to cancel debt comes at the opportunity cost of diverting money away from public services such as healthcare.

Poverty exists to a greater or lesser extent in all nations. In developed nations like the UK, absolute poverty is thankfully rare. However, there are still many that are poor in relative terms compared to others in society. Some would argue that governments should tackle poverty in their own countries before diverting resources to tackle poverty elsewhere.

Correct answers

The policy of debt cancellation is not without its critics, however. Counter-arguments include….

Debt cancellation may encourage Irresponsible borrowing in the belief that the debts incurred may never have to be repaid.

The cancellation of debt comes at a cost to firms and governments in the developed world to whom the money was owed. For example, the use of public sector money to cancel debt comes at the opportunity cost of diverting money away from public services such as healthcare.

Poverty exists to a greater or lesser extent in all nations. In developed nations like the UK, absolute poverty is thankfully rare. However, there are still many that are poor in relative terms compared to others in society. Some would argue that governments should tackle poverty in their own countries before diverting resources to tackle poverty elsewhere.

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