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Causes Of Third World Debt Crisis

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Third World Debt Crisis and Why Structural Adjustment Programs Fail
Introduction
After the Oil Crisis in the 1970s, followed by the economic recession in the 1980s, the industrialized world heavily raised interest rates on loans taken by the Third World for development projects. The Third World could not escape the crumbling economy as they were not earning enough to pay the loan, let alone the interest rate. Due to this reason, the total debt of Third World countries increased from $567 billion in 1980 to $1.5 trillion in 1992, despite of having paid back three times over what they had first borrowed. As a result, poverty, hunger, and disease have become a common issue in the Third Word, without overlooking political and economic instability. The Western financial institutes such as the International Monetary Fund (IMF) and World Bank (WB) have tried to resolve the debt crisis through Heavily In-Debt Poor Country (HIPC) initiative since 1996. However, when the HIPC initiative introduced Structural Adjustment Programs (SAPs) and implemented them on several Third World countries such as Nigeria and Mozambique, the results failed to meet the expectations of debt crisis resolution.
Research Topic
Because it is evident that SAPs have failed in certain countries, to examine the reason behind why they are ineffective and inefficient to solve the debt crisis in the Third World. Hence, the research question of this proposal is:
 Why do Structural Adjustment Programs (SAPs) fail?

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