External Debt Crisis In Developing Countries

783 Words4 Pages
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, the developing economies data demonstrates their total external debt relative to their national income and the external debt as a percent of GDP are higher than normal. Similarly, these countries also shows their higher debt servicing ratios and the significant currency devaluation experienced in economy. Many developing economies have suffered erosion in their ability to service their foreign currency denominated debt recently via the depreciations of their currency. This currency depreciation or weak exchange value of currency implies that more challenges for the debtors in servicing its external debt obligations. Thus, the situation revealed that there are some developing conomies that bear watching because potentially

More about External Debt Crisis In Developing Countries

Open Document