Slides in this set
Where is debt the highest
Debt is highest in MEDC's such as the UK and USA (USA has
$15,686,200,000,000 public debt)
This is because MEDC's have the incomes to sustain such
high levels of debt
On the other hand, LEDC's such as Malawi have
$2,383,333,333 of public debt as they cannot service higher
levels of debt
¾ of the world increased their debt between 2005-15…read more
Causes of debt
Corruption Individual debt- paying domestic
Loans- high interest rates bills- low wages- loans-
repayments + interest
Globalisation- cannot compete
Cash crops- cheap produce sold Poor families less educated
children- poor jobs
Lack of infrastructure- poor trade
Unemployment- no wage-
Money spent servicing debts not
invested- cycle of poverty benefits- pressure on government
Increasing poverty…read more
To tackle its debt Malawi joined the HPIC programme set up
by the IMF and World Bank.
HIPC stands for Highly Indebted Poor Country
To join the programme countries have to meet certain
conditions e.g. privatising agriculture, cutting subsidies and
selling grain stocks.
When countries meet these conditions they can have debt
cut or cancelled…read more
Malawi entered the HIPC initiative in 2000 but only had debts cancelled
In this time, $440 was spent servicing debts.
In 2005, Malawi was spent 9.6% of GDP on debt servicing and only 4.6%
on public health care.
Without the income people were trapped in the cycle of poverty and
lack of health care left people with serious illness.
To get debt relief, conditions had to be met; privatise state owned
enterprises, sell grain store to increase exports and remove agricultural
In 2001/02, and 2004/05, the removal of support for farmers and selling of grain stocks
combined with drought created serious food crisis.
Thousands of people died and millions suffered.
Drought had also reduced the harvest in 1991/1992 but the resulting famine was much less
severe, due to greater government intervention.
In the early 2000s, food shortages forced the government to import maize at a cost much
greater than the original agricultural subsidies.
In the wake of the food crises, in the mid-2000s a new Malawian government stood-up to the
IMF and World Bank and re-introduced fertiliser and seed subsidies. This helped to create
bumper harvests, and Malawi became a net exporter of maize
World Bank country director in Malawi criticised the policy as being "better for food security
but worse for market development".…read more