What are the benifits and risks for 3rd world countries borrowing money from other countries?

Answer 1

There is nothing specific to 3rd world countries when it comes to government borrowing. Governments borrow so that they don't have to tax or inflate the national currency immediately. The danger, of course, is that the government can borrow too much, so it would have to increase taxes or inflate the national currency in the future...

Some would say that one problem specific to 3rd world countries is borrowing in foreign currencies, but smaller developed countries such as Australia and Sweden practice this as well...

Answer 2

Third world countries could borrow money for a number of reasons. They could use it to increase education, infra-structure or industries, all of which would increase the economy of the country. In the short-term, injecting money into commerce and industry would enable business to invest into the country's economy. An improvement in infrastructure, too, would encourage businesses to move there, as would educating workers.

However, the country will need to pay back this money with interest. This means in the long-term they could lose a lot of money, and if the industries do not develop quickly enough it will all be for nothing. Also, improvements in infrastructure and education will need money to maintain it, and may force the country to borrow more money- driving it into further debt.

In some third world countries each citizen owes £500 to other countries before they're born, just because their governments needed to take out a loan.

Answer 3

risk-----economic dependence
benefit----having capital 4 economic growth i.e can implement new technology using that money