Topic: Why does a country borrow money from the world bank even when they can afford it - page 2. (Read 1187 times)

That's the reality fact. Underdeveloped countries needs the borrowed funds to build their economical Infrastructures in other to elevate the national economy ratio even as that, most of the developed countries do still borrows money to meet up some stipulated economic strengths.
Sometimes just as you @kryptqnick has narrated, not that the countries are insufficient of funds to carry our their task at the point of borrowing but they indulges on the borrowing to attract investors and the cooperative affairs. They practically tends to gain global trusts which also literally spreads about positive tags of the nations which in most cases foreign investors, corporative affairs and the intercontinental affairs could find them worthy and truthfully transparent to lias with.
And by so doing, the economy ratio of the country is being broaded to yielding economy initiative in returns.

Many developing countries borrow from other nations to meet their basic needs. Unfortunately, my country is also among those that have accumulated substantial debt from larger countries. While this may seem off-topic, it's crucial to highlight that nations relying on foreign borrowing often lag in development.

When a country borrows from another, the lender imposes its terms and conditions. Failure to repay the loan on time can result in relinquishing valuable assets to the lending country. In a vicious cycle, some countries take out additional loans to repay existing debts, trapping themselves further in debt.

Consequently, a country that relies on loans begins to compromise its sovereignty. I contend that any country borrowing extensively from others ultimately undermines its development and freedom.

Every country has their own reasons why they are taking the loans. So if they see the advantage of taking a loan, they would do it even if they have enough money in their vaults. But as you gave example of what's happening in Vietnam, they are using it to improve their transportation and so their economy. And for other countries, I would say, they have other things to attend to, depending on their economic goals and financial needs.

In general, countries basically want to increase its capital spending to economic stabilization. Now, it depends on their current needs whether to course thru the borrowed funds to government projects or support developing businesses.

I strongly agree with this statement because every country wants to develop their economic conditions through developing their country. Because of this reason, every country tries to develop its transportation system by developing roads, flyovers etc.

For an example- In Vietnam, lots of new bridges, roads, and flyovers are recently made which greatly impact on the economy of Vietnam. For doing these developing works Vietnam takes different types of loans. without taking a loan it can't be possible with their own fund. Because most of the funds which are collected by different types of tax are used to provide the salary of government employees. So if any country wants to develop their overall condition then they must take loans.

I think there a couple of reasons why they do. One could be fiscal pressure and a budget deficit. Even well-off countries like China may need to borrow to cover budget deficits, particularly those arising from fiscal pressures facing certain regions or provinces within the country . Also attractive borrowing terms could oftentimes be a reason. World Bank loans often offer lower interest rates compared to domestic lending rates, making them an attractive option for countries like China. The World Bank was created to support countries that could not access capital on reasonable terms to meet their development needs. While China may not fit this description today, it continues to borrow, possibly to address specific development requirements .
Even though developed and productive countries have substantial resources, they may still borrow money from the World Bank to adress specific fiscal pressures, take advantage of attractive borrowing terms and meet their developmnt needs.

  Countries borrow money from the World Bank to make up shortfalls, fund new projects and sometimes they borrow because they have no choice or think that they can just boost their economy with a cheap loan which turns into a vicious cycle commonly known as the 'Debt Trap'. When a country borrows from the World Bank (or the IMF, or a foreign country, or foreign banks), it is not getting any nicely colored pieces of paper. It is getting some real goods or services. In case of a World Bank project, it might be a power plant, or a water treatment facility, maybe just food, and maybe healthcare or education. You may read in the paper that a country X is getting 500 million dollar loan to build a power plant - but this often means the World Bank is paying some construction firm from an advanced country to build the power plant and country X is getting so and so many tons of steel, concrete, wires, turbines and many other things arranged in a form of a power plant. Country X will be able to consume more after the World Bank project is done - it will have more electricity. Some of this electricity might be exported to pay back the loan, but hopefully the World Bank and the country concerned made sure the project is profitable and the country becomes better off.
   If government print money to pay off the national debt, inflation would rise. This increase in inflation would reduce the value of bonds. If inflation increases , people will not want to hold bonds because their value is falling. Therefore, the government will find it difficult to sell bonds to finance the national debt. They will have to pay higher interest rates to attract investors. If the government print too much money and inflation get out of hand, investors will not trust the government and it will be hard for the government to borrow anything at all. Therefore, printing money could create more problems than it solves. While countries can print their own currency, doing so excessively can lead to inflation and devaluation of the currency. Borrowing from international organizations like the World Bank allows countries to access funds while managing the impact on their domestic economy. When a country prints* its own currency, it just creates more colored pieces of paper. It creates no real value. People in the country cannot consume more, because nothing extra was produced. Printing too much currency just creates inflation.

A country's debt and private debt are two quite different things. Maybe many people ask, why is a country that is already developed and large and has a fairly high national income, but still continues to borrow from the World Bank? this is because countries need it to develop their economies without disrupting their finances. Because loans from the World Bank usually have low interest and longer loan terms. They also have professionals who can help a country to develop their economy. So a country has carefully considered why they take a World Bank loan, because it is profitable for them.

well to be honest I just scroll a thread and found your and Im just curious as you just do quick google search and found Countries borrow from the International Monetary Fund (IMF) and the World Bank for various reasons, primarily related to economic and financial stability, development, and support during times of crisis.

I mean, I have an crazy idea what if the government just print out money out of thin air and then inject it to build lets say a toll a hospital and school but for-profit purposes after they create a money lets say 1 B to build hospital and then after the hospital got profit 1 B they just burned the money out of circulation did u guys get it.

Apple got a loan to build their campus, when they had 100 billion in cash. Honestly, I do not know why they wouldn't do it because I like to not have a debt, that personally is a very big deal for me and paying my debts back is something I really like to do and feel proud about, it is something as serious as anything else.

But. when we are talking about a situation where we can see the profits rising as much as we do, then we realize that they are making a debt to grow and make more later on. You build a bridge with the debt, and then charge anyone who use that bridge, and make profit, you build an airport and charge all the companies that work there, you make anything and charge and profit that way the debt turns into profit.

Most of the time countries just do it for development for sure something like a big project that they are planning like roads, instruction, bridges, etc. which could be a big help to the country. This project cost millions of dollars they probably cannot afford all of the government if they just going to pay it all at once, the world bank surely is going to be a great leverage as long as the country has a good record as a country that can pay its debt. Having debts is not actually going to be a bad thing if a country cannot really generate a huge amount of income at once, like on a natural disasters like earthquake or storm, it could easily destroy a huge of places and cost a huge amount of money which something that a country cannot foreseen, that emergency money that we needed is going to be great in order to recover fast in we encounter this kind of problems. As long as this money helps improve our way of living and actually contributes when it comes to the economic aspect on the country it will be a huge help and can be a good thing when it comes to generating money so that the country can easily repay its debt.

There are for sure other sides of this like lending money so that they could have a claim on the land of the country that has debt on them, which probably going to be silent colonization of other countries, I think I watched something like it on youtube about china doing this to other countries.

Countries that are in debt certainly have things that must be resolved in the interests of their people in general and state debt is positive if the state owes debt for the right purposes. Debt is used to finance productive things, so that the results are greater than loan interest, but still state debt must be safe with the JDP ratio of state income and state debt must be monitored so that its use is not misused or corrupted.

Apart from that, the ratio of state debt in the form of foreign loans/foreign currency is minimized, if necessary, 100% of the debt is in the form of domestic debt to the people. This debt actually brings prosperity to the people, because the interest is enjoyed by the people themselves, for example: Japan. National debt is always measured by a result called ICOR. the extent of the benefits/results from the debt. If there is a loss, there must be a mistake in targeting development or it has been corrupted. This means that state debt does not always have to be thought of negatively, if the debt is used appropriately and carefully and there is strict supervision.

Why do rich nations continue use the World Bank's loan window? Isn't it puzzling? This is about leverage and financial strategy. Despite their wealth, these nations borrow. Why? Rates of interest. It should be obvious to borrow at low rates for higher-yield investments or infrastructure. The irony is that these governments preach fiscal restraint while their ledgers show debt and reliance

You're right. Prosperity and widespread borrowing are incompatible. It's more than money, man. International finance's madness is like playing with fire. The terrible irony? High-stakes loans and interests hurt everyday Joe and Jane. Loan ledgers increase while economies falter. Borrow-and-spend cycles keep nations in economic regression rather than growth

the government will go to borrow money from world bank, i see in my country government borrowing money from world bank to build a bridge it's 6.15 km long and spend almost $3.6 billion and now government collect money or earn money from people who's using this bridge, part of the loan can aslo be paid from this money. a government taken loans money for infrastructural development in their country,

The logic is why they are willing to borrow money from the World Bank when the country's financial resources are still sufficient. Usually countries want to lend money to the World Bank because of the country's development needs, both physical in nature and the development of the resources needed.

I don't know for sure what the reason is for your country to lend money to the World Bank, but this practice is carried out by many countries that need additional budgets for development in that country. Poor state management can destroy the economy so the government must try to find additional money for the country. For example, if they try to build infrastructure that is a bit forced so that the availability of money in the country is insufficient so they have to lend money to the world bank.

Problems arose again when the debt repayment system came into effect and if the strategic projects being built did not produce profits then the state had to pay the debt from its people's taxes. This is where problems arise and the country will not be able to balance income and expenditure, which will cause problems.

The problem of your country is  bad leaders and mismanagement, is only a country that has no good governance that will have many Natural resources yet they take loan from world bank. I myself has asked that question countless times but I just concluded that the men in power are the reason behind it. The system of government is a poverty planed government brought upon by evil, bad, and corrupt leaders with selfish interest of doing what pleases them after long awaited time of power deprivation. Since they have struggled for position and power for long and yet they where unable to get it , the slightest opportunity given to them has been misused due to greed. They practice a system of govern they called " it is my own turn system of government" a situation where power is given to someone or group of people and they think that this is there last chance, it then means that all what they were concerned of, was to enter the position and take there own cake. And never have a better plan. Appointed government personnel is given power to run the affairs of the government In a truthful, peaceful, love and honesty etc with the notion of a good governance, but if they fail to do that the reverse will be the case. In conclusion what could only make a country to have natural resources and still borrow money is because of bad leadership and and poor economic planning.

Any potential answer has been said but a country or a government is also like a businessman. They don't want to use their own fund for building infras and new projects. A project that will generate them money is likely just being financed by the world bank and that's how they're going to return and pay it once those projects are operational and also start to make money. I'm not sure why even rich countries does need to do that but basically, there's real economics on it.

lets see the government as a business and each country have there own reserve and  every country really on there foresight reserve  and you have to have an equivalent foreign money in the reserve before printing, because if they don't do it that way the money will lose it value look at what happened to Zimbabwe that is exactly what will happen to any country that that tries to print money without having the equivalent value of that in foreign currency but if you look at countries like us there own reserve they usually make use of gold. and another thing is that if you look at it the government don't have money and the only thing we can do is to rely on revenue generation and other stuffs like that so the only way to get money is to borrow and it will have to be other currency. and in conclusion printing to much money in circulation will affect the economy of that country and that country's currency will lose its value and it will take time to actually reclaim it except they will stop using there own currency.

Even though it is difficult to understand,on average every country has a loan from the world bank and it seems like it is mandatory for the leader in

power at that time and the economic crisis that hit, plus the injection of insufficient funds for a country's development,could
happen to the country.developed countries are almost the same as developing
countries and world banks cannot do much by providing loans.

Maybe to execute even more constructions at same time? Time is money, and for countries and businessmen it's preferable to borrow money to maximize their productions, as the final income after the construction is done will reward them enough money to pay the loan back and still generate massive profit for themselves from that moment on. It works like a long term investment which will return very sweet profits.

On the public sphere it's specifically interesting to borrow money, even though the government already has a large source of income, because usually interest rates are low, and since the public entity lasts "forever", there is no reason to avoid having some continuous debt.

Well, then the money must have been being managed poorly, or the people in charge of your country are allotting this money to their own pockets, what is really common in many governments around the world. Personally, I can say the same thing about my country, because it's a very rich one, large in extension, while producing enough food to feed the whole world, although there is never prosperity and a strong economy going on for its citizens... I don't blame the government, though. I blame the countrymen who choose their representatives accordingly to their own personal morals and values.

Don't think that developed countries don't have any debt at all because in the end, it will increase the stability of their country because after all, debt is not a bad condition if you can use it properly.
There are several advantages that will be owned such as from a known currency or even several other conditions such as interest rates and tax ratios and high GDP will actually make them have a positive advantage in the loans made.

In addition, we can know that as long as they borrow it means they will definitely get more benefits so that for large countries sometimes the amount of borrowing will be much larger because they realise that it will make them more stable in terms of long-term economic strength.