Many Governments take foreign loans, are these loans really beneficial for GDP?
Good question. My answer would be which governments do you think are most effective in utilizing these loans? the answer is that only corruption-free governments are effective in using this resource to best serve the improvement of their country's overall economy. Corrupt governments waste this resource and use very little to the service of their countries. So the answer to your question would largely depend on how strong institutions in the country that receives such loans, so it can monitor the use of these loans effectively.
Good question. My answer would be which governments do you think are most effective in utilizing these loans? the answer is that only corruption-free governments are effective in using this resource to best serve the improvement of their country's overall economy. Corrupt governments waste this resource and use very little to the service of their countries. So the answer to your question would largely depend on how strong institutions in the country that receives such loans, so it can monitor the use of these loans effectively.
I'm completely agreed with Marwan, in addition foreign loans are often used to subjugate borrower countries in a way that they lose control over the loan itself! At the end, corrupt governments will expose the country's economy to pre-stolen loans, thereby fulfilling the borrower's and lender's desires!
Good question.I think it depends upon the mindset of government.if the loan money utilized properly for the development then it has a positive effect on the GDP
Victorian governments took loans for adventures abroad-but thiis strategy comes from the haits of kings. Taking loans from money-lenders to finance wars. The problem is, loans can be employed to control national policies so a rethink is required.
Of course Dr. Marwan, if there is fiscal discipline amidst instructional checks and balances, the loans could be used effectively
Loans are never progressive !!
Local spending is roughly proportional to GDP . Ask people to spend more or earn more to spend more :)
It often depends on how the foreign loans are utilized. If they are used productively, then it may be very useful especially in developing countries.
However, it would have been better for these countries to iron their own clothes with their locally produced irons. There are a lot of painful strings attached to foreign loans!
The interest rate charge on the loan and the corruption in the side of the government to to put the money to judicious use alway make the loan not to benefit the country's GDP
Such loans are very beneficial if these are used for development --- then it will give a boost to GDP.
Most of the time the external loans of the governments do not improve the conditions of the population of the country in question; that is, the internal economy. They are generally used for governments to increase current spending or their own perceptions and investments.
So that only rarely improve GDP, since its effect is more remedial for the macroeconomy of that country.
No. Control to a part if not the whole of the economy passes into the hands of the loaner country. It seems like a good idea, but never is.
I do not know of one country that achieved long term benefits in this fashion.
Going by the experiences of countries who have ventured into foreign loan ideals overs last four decades, their economy has ever been manipulated by the lender, their efforts to develop usually end up advancing the economy of the lender's economy. Nigeria for instance paid more than she borrowed only to service her loan and other sundry penalties without paying her principle. It is better to engage internal mechanism to develop GDP than subscribing to external approach like foreign loan
- Badges
- Science topic
- Similar topics
- Economics