Global Debt

1. Global Debt By Pleckgate High School Mathematics And Computing College

2. Debt Debt is credit which means if you give someone credit then you are going into debt. this debt is just simple but the debt that commercial and huge corporations get into are a lot more complicated.

3. Interest Interest is a fee paid on borrowed assets. This fee is compensation to the lender foregoing other useful investments that could have been made with the official loaned money. So basically if you are asked to pay interest when you have borrowed money then you are paying more then you originally owe. An example of paying interest is: • Having a mortgage • When cars are bought on finance.

4. Global Debt Most of the countries in the world are in debt. This is known as global debt. Some countries are in more global debt then others. Some of the poorer countries are in debt with the richer countries e.g. untied states of America and the United Kingdom. The U.S. and the countries in Europe are the main lenders to third world countries. The richer countries tend to lend money to the poorer

5. Rich and Poor Countries The effect of debt in a poor country that is in debt is a negative effect. This is because they can’t use the money to have food, water, medicine and to protect their country. If they use the money give on a long term project in the long run they will save and gain a profit from this. But if the country uses the money to buy food, water and medicine this will help the people but when the money runs out they will be back where they started. However a rich country is a country which is well-off with medicine, food, water etc. This means that they already have money for schools, hospitals and homes.

6. Differences between Rich and Poor Countries The differences between these are that a country that is not in debt has a better gross domestic product than a country which is in debt, because if you are in debt then it means that you need money and resources to aid the country. Also if a country is in debt then they have to pay all of their money back because otherwise other countries won’t trust that country in the future and it can sometimes lead to war whereas if you do pay your debts you are stuck without any money again.

7. What is HIPC What is HIPC, this stands for heavily indebted poor countries. The scheme was set up in 1996 by the World Bank and IMF. The scheme was set up to cancel some of the poor countries debt. This is to reduce the dept so it is more manageable to be paid back. In the future they want to cancel all of the debt which poor counties can not afford to payback.

8. Who controls HIPC HIPC is monitored and put into action by the World Bank and IMF. But the rich countries, private creditors and regional banks who supply the money, are encouraged to get involved and decide where the money should go. On average though the commercial creditors cancel less debt than other creditors do.

9. How Countries Claim HIPC Countries qualify for HIPC if there are poor countries. Countries which are counted as poor are those with an annual income per head of $825 or less a year. Also if they have debts that are more than one and a half times their annual export earnings. The country must have a World Bank or IMF programme running to gain HIPC. Also to have a HIPC record they must have a track record of what the IMF says for three years.

10. What HIPC Gives HIPC give some relief to the debt when going through the programme. This could to take many years then when this is finished the dept they can’t payback is then cancelled. Although still the country has to pay one and a half times there total income every year to payback the debt.

11. Non Eligible for HIPC Bangladesh: In 2005, Bangladesh paid $791 million to the rich world in debt payments. However, the World Bank does not even consider it moderately in debt. It instead describes Bangladesh as ‘less indebted’. Because of this Bangladesh’s debt is considered sustainable and instead of being rewarded for prompt debt servicing they are not eligible for debt relief. However some things have been done. Canada cancelled Bangladesh’s bilateral debt of $600,000 in 1999 due to devastating floods and extreme poverty levels. Also, in return for an $8.5 million the United Sates agreed to relieve $10 million in 2000. Bangladesh was one of the original countries highlighted as being in immediate need of debt cancellation.

12. Going Through HIPC Haiti: In 2006, Haiti gave $92 million to the rich countries in debt payments. This debt came due to the loans taken out by the corrupt Duvalier family. Although the loaning countries knew the money was being misused they continued to lend as long as the country remained anti-communist. Unfortunately, Haiti is only eligible for less than half of its debt being cancelled. This means that the country is repaying money used for propping up a corrupt and oppressive leadership. Haiti will still owe over half a billion dollars in debt after completing HIPC. It will be possible for the cancellation of all debts in the future but will be at the cost of reduced aid. Aid that the country needs.

13. Completed HIPC Malawi: In 2005 Malawi paid $95 million to rich countries as debt repayments from a total debt of $3.2 billion. In 2006 this was reduced to $5 million. There are many conditions that Malawi must conform to for this cancellation. These include: • Strengthening of land and credit markets • Certain financial and economic policies being put into action. • Specific actions regarding health, education and safety. • Proper management of spending through

15. Global Debt The Debt Simulation

16. Introduction

17. Best and Worst Outlook We: • Read through ‘Motivate’ website • Decided to use the same randomly generated numbers for each country to keep it fair. • Inputted the generated numbers into the simulation. • Analysed the Results.

18. Outlook Rankings Best Outlook Isistan (+£16.85bil) ABHI (-£49.11bil) Latinia (-£57.50bil) Zambopo (-£308.40bil) Worst Outlook

19. Affects of Changing Existing Loan Size • By changing the loans sizes we found out that because of the interest the money is used quickly meaning needing another loan. Out of Moneyand deeper in debt Loan Running of Country Re-Paying Loans and Extra Interest Money Country Makes

20. Interest Rates • Fluctuation of Interest Rates

21. Feedback on Simulation • Simulation very good. • A lot of insight on how global debt works. • Clever idea to make random numbers determine factors like natural disasters.

23. Comparisons of Debt Comparing Public debts of countries, as a percentage of their GDP (Gross Domestic Product) rates.

24. Top 10 Countries in Debt, as a percentage of their GDP

25. Bottom 10 Countries in Debt, as a Percentage of their GDP.

26. Here is a scatter graph showing the correlation between GDP and amount of public debt for the top 10 countries in debt. This has been constructed because we want to see if the amount a country produces has an effect on how much it owes.

27. This clearly shows that the countries with the least GDP are in the most Debt

28. This clearly shows that the countries with the least GDP are in the most Debt

29. Jubilee Debt Campaign

30. Intro The world's poorest countries pay over $100 million every day to the rich world. We have prepared a powerpoint to show the basics about how it works, and why it should stop.

31. Poorest Countries The very poorest countries in the world are still paying over 4 million dollars every hour to the rich world repaying debts which in many cases arose from irresponsible lending. Rich country lenders have often done very well out of the loans they gave to poor countries, winning support or contracts. The poor people in countries with debt often did not benefit at all. But it is them who suffer from the demand that these debts be quick.

32. Why Should We Drop the Debts? • Debts that a country can't afford to repay without meeting its people's basic needs. • Debts on loans that the lender knew was going to be stolen through corruption. • Debts in payment for projects that failed because of bad advice or incompetence by the lenders. • Debt on unfair terms, such as very high interest rates. • Debts contracted illegally, where proper processes weren't gone through.

33. Where did the debt come from? In the 1960s and 1970s, poor countries were lent large amounts of money. Many banks in rich countries had huge sums of money deposited with them. They had to make money on this by lending it, and rushed to lend to poor countries. Meanwhile, many rich country governments were keen to support countries that they saw as potential allies in the cold war, so they lent them money.

34. How do we prevent future debt crises? There must be international action to make sure that we never return to a debt crisis like the one which has now been crushing poor countries for decades. After the 'clean slate' of cancellation of unjust and unpayable debts, this will mean firstly that there must be just trade rules, a just tax system, and sufficient, high-quality aid so that countries are not forced back into debt.

35. All of the countries above that are highlighted in orange are countries which have the most poorest conditions and the pictures below are from poor countries