Monetary Fund and International Development Association

The external balance is also a huge problem in LDC’S. The little exports they do have (mostly commodities) are small in comparison to the huge amounts they spend on imports. The need to borrow to finance the CAD’s. This leads to the cycle of rising NFD and CAD’s. To tackle this problem governments have had to try and promote exports. The WTO worldwide reduction of tariffs will assist this though government policies need to be implemented to seriously boost export revenue and turn the consumers away from imports (import replacement).

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This reliance on export revenue often leads to further problems for the economy though. In Mauritius, they have cleared 25% of their forests in the last 19 years purely for export. 11 This causes massive environmental effects and also is a serious concern, as when the resources run out the country’s economy will fail to stay afloat. Corruption in LDC’s is often outrageously high. Nigeria is a perfect example. It has been estimated that in the last twenty years over two billion dollars of oil revenue for the country has been embessled.

This is mainly due to their last dictator who ordered the Nigerian Central Bank to deposit 15 million dollars a day into his own Swiss bank account 13. This works out to twenty percent of GDP and when you take into consideration that NFD is over forty percent of GDP, the country is not left with much money. To solve this problem institutions such as the international monetary fund (IMF) have refused to lend money to support them. Though to truly solve corruption a democratic government must be elected. Australia has tried to force Fiji to create a democratic government by cutting trade 14.

Natural disasters and war also act as barriers to development in LDC’s. Natural disasters have a much greater impact on LDC’s than developed nations. Floods and earthquakes can have dire effects on the economy. War torn nations will very rarely be working at full capacity. If there is war or civil unrest production is slowed down as infrastructure is often damaged or workers are deterred from working. Governments also spend taxation revenue on weapons instead of stabilising the economy. A perfect example of this is East Timor.

Disease is often common in LDC’s and can have a serious damper on the economy. In Africa over 24 million people are living with the Aids virus. This accounts to a lot of the labour force and obviously will have negative effects on production and growth. The IDA is the driving force in trying to solve this serious epidemic. Since 1985 they have sent more than US$400 million to Africa solely to promote aids awareness programs and educate the public about contraception 14.

Press freedom is a less talked about much very strong barrier to development. The media is a very large force in promoting elections and governments. In Mexico the government allowed Televisa (televsion company) a monopoly is they didn’t play any anti-government shows and supported the government in everything they did 15. In the eighties journalists were killed by the government police in Mexico City if they published any anti-government articles 16. This kind of manipulation lets governments get away with corruption and gives them freedom to ruin the economy without opposition. International force needs to be applied to stop problems like this, and education of the public through school systems etc.

To support all of these strategies to boost development there are a number of international institutions set up, The World Bank is the major force behind giving untied loose loans to LDC’s to promote development. The International Monetary Fund and International Development Association also are driving forces in the race to stop poverty. As well as these institutions individual nations contribute foreign aid. Though there is a distinct lack of it throughout the developed world and a lot of the aid is given out of fear of dispute rather than kindness. To truly solve this poverty and underdevelopment the world needs to put all efforts into foreign aid both monetary and advice.