III Международная студенческая научная конференция Студенческий научный форум - 2011

Modern trends in the development of the world economy are the increase of internationalization, integration, globalization of national economy, amalgamation of national markets of the production factor into world markets. Principle features of the given processes are large-scale liberalization of finances movements and considerable capital mobility. This in its turn has led to globalization of the world financial relations and has extended foreign financing of different countries. Therefore, international foreign liabilities became an important characteristic of the world economy nowadays.

Third World countries are economically underdeveloped. In developing countries Gross Domestic Product is extremely declining. Local population is vulnerable. They suffer from different pandemic, natural disasters. The majority of the population lives below the poverty line. The data shows us terrible results. The debts level is extremely high concerning GNI index. For instance, external debt of Liberia is 257,2%, Guinea-Bissau 253,2%, Seychelles 247,8%, Congo 121,4% etc.

Heavily Indebted Poor Countries borrow lacking financial funds from different sources such as Paris Club, International Monetary Fund, World Bank, European Bank for Reconstruction and Development and others. Bretton Woods Institutions play an important role in the development of the third world countries.

First of all, I would like to tell you about the IMF. It extends credits to countries with the balance-of payments deficit. Issuance of loans is accompanied with a set of conditions and  recommendations. From my point of view, the IMF´s aid is ineffective and carries the pro American character due to the fact that the main shareholder is the USA. These funds grant credits with a number of requirements which are often devastating. To illustrate this idea I would like to mention such a country as Ruanda. The IMF extended loans to Ruanda on conditions that the government ceased to support farmers and devalued local currency. It provoked collapse of the national income and as a consequence the bloody civil war.

The World Bank is the international financial institution. The WB is created to organize financial and technical assistance to developing counties. According to the research 60% of the WB projects were unsuccessful. The WB is aimed to combat poverty but in fact only 1% of really poor countries received loans previous year. The states which didn´t practically receive the financial help from the World Bank have become successful. In those countries which were addressees of basic donations the economic situation is poor.

Finally, the Paris Club unlike above mentioned institutions really helps heavily indebted poor countries. Main principles of this international organization are debt forgiveness, restructuring, prolongation. Nowadays the maximum sum which this organization can write off is 80% of the overall external debt. Party members also carry joint responsibility. They assume debtors´ commitments. The Paris Club is extremely influential and respectable in the international community. Participating countries influence world economics. The Paris Club grants invaluable aid to developing countries.

From my point of view, the following measures should be taken:

Firstly, HIPC must refuse assistance of the IMF & WB. Previous experience shows that developing counties fall into debtor´s prison with the help of Bretton Woods Institutions. Owing to the fact that initial resources were used inefficiently, countries have to borrow new credits in order to discharge interest on the credit and credit principal. All this reminds a vicious circle. The only sound decision is to operate independently and develop own economy. This process is certainly complex and long-term. Stable juridical systems, executive power, implementation of several economic reforms are needed for successful development.

Secondly, it is necessary to carry out more rigorous monitoring. This monitoring concerns the size of external debt and the effective use of borrowings.

Thirdly, the Paris Club should improve its activity. For instance, it should implement direct investments in developing economy by means of building new plants, creating new jobs, competitive products. It will bring profits both to investors and HIPC. This mutually beneficial partnership will be a long-term solution of the debt problem.

In conclusion I would like to say that HIPC should unite their forces in order to combat this serious problem.

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