External Debt In Developing Countries

Developing economies, particularly the low and middle income countries, are renowned for their heavy reliance on external borrowing in their economic development process. Furthermore, the forces of globalization and interdependence among countries in international trade, capital flows and international lending are now much stronger, that has accelerated the adverse effects of global shock dissemination among the developing economies. Historically, pre and post the 1997-98 East Asian financial crisis, the accumulation of the debt stock is dramatically increasing from year to year and most generally these developing economies had a large current account deficits that were financed by foreign capital inflows.

For most of the countries under discussion,

It is clear, therefore, the reported amount of debt rescheduling, increased a concern of the important of debt servicing potency of borrowing countries. The need for an evaluation of general qualifications of borrowing countries to allow the lending institution to portray a positive reputation of the country is crucial and significant. Evidently, there are no clear country based or global based factors to be a preliminary guideline considered in the assessment of debt servicing difficulties. Thus, the crucial question arises, “what are the factors causing the difficulties and challenges of financing external debt obligations in most development process of developing economies? What are the importance determinants that catalysts or impediments debt servicing ability of a country’s?”. And to what extent the debt management strategies of developing economies can help sustain their external balance position particularly during the crisis. Moreover, developing countries located in a different geographical region with a multifaceted differences and uniqueness, which may influence the determinants of the debt servicing ability of a country. At this juncture, it is pertinent for the developing economies to bring the external debt servicing problems into a high focus to comprehend the determinants that developing country’s needs, to escape from debt servicing difficulties in the current global disturbance so as to avoid sovereign default