The Struggle for Stability in Developing Countries

679 WordsFeb 19, 20183 Pages
Developing countries want to gain wealth and stability, in order to do so they ask wealthy developed countries for financial assistance in the form of loans. They then can use these loans to increase their countries output by more than what it takes to repay their debt (FLS, 322). Many times they have to go through international financial organizations such as the IMF in order to gain these funds. The incentives for both sides is the high probability of the projected outcomes out-way the projected costs. However, maintaining payments of loans can be very difficult and can weaken the domestic economy in order to pay off the loans. If the government does not invest the money in social programs and just uses the money to help large corporations then there will be public outcry because the citizens will be negatively effected and feel like they did not benefit from the loans so should not have to pay the consequences. Thus loans can have both positive and negative outcomes for both lenders and borrowers. The International Monetary Fund is a major international economic institution that was established in 1994 to manage international monetary relations (FLS, 327). International leading programs such as the IMF provide financing to developing countries that are facing financial problems that threaten their economic growth and provide them with loans in order to boost the productivity of their countries. The IMF includes both lending and borrowing countries and all members are
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