A debt cancellation agreement may do one of the following: cancel the debt, or defer payment on existing debt. Most lenders in the United States are authorized to offer a debt cancellation agreement to the lending customer. The agricultural price policy programs are the outstanding example of price floors in U.S. product markets. Unfortunately, price floors are every bit the mixed blessing price ceilings are, and for the same reason. They change the symptoms with solving the underlying problem, in this case substituting a state of chronic, legislated excess supply for the markets natural equilibrium.
In 2006 the World Bank, International Monetary Fund and African Development Bank agreed to completely cancel the debt of 18 qualifying countries. These debts were indeed cancelled totaling approximately $40 billion dollars with payment savings of one billion dollars. These countries were so indebted that they were spending more than they made in income, taking out new loans to repay old ones. These countries are the prime definition of growth versus development. “You can easily imagine instance in which a country has achieved higher levels of income (growth) with little or no benefit accruing to most of its citizens (development) (Case, Fair & Oster, p.410).”
One of the benefits of debt cancellation is for the developing country to begin investing in the rebuilding of their savings and economy. Rapid economic progress will speed up the progression of the developing country bringing the country closer to the already developed countries. The government now had the freedom to focus on rebuilding and strengthen the country and not just replying on the private sectors. For example, building infrastructures such as schools and roads and along with providing transportation between cities and by air promotes growth and efficiency.
“Every developing nation has a cultural, political, and economic history all its own and therefore confronts a unique set of problems (Case, Fair & Oster, p. 412).” Debt cancellation has the potential to free up cash in these countries to put towards the economic growth and development of their country. Valuable cash can be evil and become mismanaged if it’s not properly care for. A country needs to patrol its politicians which can contribute to the political mess of the government. If government corruption persists, the money will not be invested to aid and help the developing country and its people but instead it will deferred the people from trying to better themselves as well resulting back to a life of poverty destroying the growth and development of the country from any further improvements.
“Other characteristics of economic development include improvements in basic health and education (Case, Fair & Oster, p. 402).” Providing healthcare to the people will improve their health in society which will contribute to the redevelopment of the country by improving the number of workers. Providing clean and potable water to all areas of the country will also improve the citizens well being which will promote growth in other areas. For instance, education is the key to a successful outcome of any…