Topic: Why does a country borrow money from the world bank even when they can afford it - page 3. (Read 1188 times)

Efficient governance hinges on a nation's ability to manage its fiscal resources effectively.  National governments, much like businesses, require a steady stream of revenue to fund essential services like healthcare, education, and national defense. This revenue is primarily generated through a tax system, where citizens and businesses contribute a portion of their income. Additionally, governments may collect levies on specific goods or impose duties on imported products.

However, there are times when a government's spending surpasses its income, leading to a budget deficit. This situation necessitates responsible fiscal management strategies. One approach  involves strategic borrowing. Borrowing allows governments to undertake crucial infrastructure projects or invest in long-term growth initiatives that might not be feasible with current revenue alone.

That's what our country did, especially when the former presidents of our country approached and made friends with other presidents to borrow money, but the worst part is that there is no concrete plan to use the money they loaned, and the people who will suffer are the people who pay the right tax, but what they pay is not benefited. funny right? Then with the size of our country's debt, maybe until many generations have passed, our country will not be used up or able to pay.

Loans are not cheap, they come with a price which we call interest, these interest are high in percentage especially if a country is coming to borrow because they believe with time you will grow the money to pay back, I mean you're a sovereign nation so gathering the capital and interest to pay back won't be a issue they believe. However there is always a saying that he who goes borrowing go sorrowing, because taking a loan is almost like a rope tied on your neck until you upset that loan with its interest the rope will not be removed on your neck. so it's not always rosy for countries to go and borrow either from the IMF or any other sovereign wealth fund, I've known of a case of some countries not being able to pay back the loan at the stipulated time they where given and they've surrendered a government own generating asset to the loan issuers.

Developed countries, that took loans from the World Bank did it after World War 2 to rebuild their economy. I don't know any developed country that takes loan from World Bank. Can you name one? As I know, at the moment developed countries donate money to the World Bank, they don't take it. Developing and least-developed countries take loans from the World Bank, the loan is fulfilled by rich countries like the US, Australia, Canada, Denmark, France, Germany... Poor countries receive loans with low to zero interest rate. The purpose of this loan is to improve their living and help them develop.

Well, most countries cannot fund all the large projects from their tax income, so to expedite these projects, they borrow money from developed countries.

A large portion of the tax income goes to the payment of government employee salaries and benefits, so there are not enough tax money to fund large projects. ( upgrading roads and water pipes or building dams)

The government is a business built on tax payers money and most large companies borrow money from investors or sell shares or bonds to fund large projects.

The reason why they still borrow is probably because they can pay in terms of favors, say for example, Country A is in dire need of funds because they've gone over their annual budget at the 2nd quarter of the year already and World Bank is there to offer the loan to Country A, now World Bank is consisted of Country B, C, and D and the World Bank knows that they're going to have a hard time paying it and so they add some clauses to the terms of the loans so that the countries would benefit from the loan at least for the time being that the loan isn't paid like for example, Country B has some interests in building something in Country A then they can just do some lobbying stuff that will make it easy for Country B to build things there, I don't know if I'm right but this is what my teacher told me about how these loans work.

Public debt is one of the big problems today. However, the debt taken by the government in the last few decades is mostly used to finance unimportant expenses. In other words, it is transferred to live according to the ability of our country, our country chooses to continue to indebted not to worry about how the debt will be paid back in the future. The impact is that almost all major countries in the world in very vulnerable situations. Many officials try to justify this with the argument that high public debt is the price to be paid to have an advanced economy.

The reason for developed countries is fond of debt is the debt needed to withdraw economic growth. This is almost similar to a company that is in debt to finance projects or new businesses to pursue more profits. And, the current debt rating is closely related to the reputation and condition of the country's economy. Developed countries, very much better debt rating than developing countries. And even in the currency investors choose investment in the currency they know and trust, such as US dollars. This is why the government of developed countries can at will issue bonds. The benefits are not obtained by developing countries in debt. Because the developing state government can issue debt in its own currency, but it's just that it is very risky to domestic investors. America is a country that really takes advantage of this advantage. They print dollars to withdraw the circulation of dollars around the world through the issuance of debt letters.
As the debt rating affects interest, the state reputation also affects the interest in the debt letter. With developing countries, they have to pay higher interest rates and of course there are consequences of their debt in a stronger foreign currency to balance the risk of investors who want to buy their debt letters. Developed countries can also be a lot of debt because they are supported by high tax revenue. The opposite thing in the country develops the ratio of tax revenue is often still low. So that sometimes in the scenario there is bad, because the tax revenue is still low, the state debt payment is developed by issuing new debt alias digging hole closing hole.
This is because state assets cannot be confiscated to pay back funds. So that when the country develops unable to pay, they will re -negotiate which is often also detrimental to investors. And also in developed countries do not consider coruspsy a big problem. So they dare a lot to debt, because the history of the use of funds from debt in the past is considered successful. But with the many benefits does not mean that developed countries are not risky in debt. Government debt may have a bad impact if the management is carried out badly.

So what I can conclude why the country is often in debt is to avoid oppotability loss where the reason for borrowing debts is because of the needs that need to be spent by the state and their nature cannot be postponed. And providing assets for the next generation, this is intended that state debt can be an investment that will meet the justice between its generation by inheriting several assets. And there are also incomplete state revenues, such as taxation, customs, non -tax and grant state revenue. While the consequence of the difference in lack of state income and expenditure is the APBN deficit. Therefore it requires state debt to stimulate the people's economy. Because that way the shopping policy can be prioritized to be more productive. And there is also a debt to maintain economic growth which due to many infrastructure projects resulting from government debt, although the results cannot be felt in the near future. And debt can also develop financial markets.

Rich and productive countries don't borrow money from the World Bank. The rich countries are emitting government bonds and sell them on the global financial markets. Are you sure that the rich countries have enough money to cover all their needs? Many rich countries have big budget deficits, that's why their borrow money to cover their government spending. Otherwise they will have to raise taxes or cut government costs. The simple answer to your question is "because it's easier that way". It's easier to get into more debt, instead of trying to put your finances under control. Financial leverage is also a thing. Countries that have big levels of debt like USA, Japan, China and the UK look wealthier than countries, who aren't so well developed, but have lower levels of national debt.

Why doesn anyone borrow money when they have the money to pay for something? It's always better to use someone elses money, even if it comes at a cost, as long as that cost can me made up for.  For example I'm getting ready to buy a new car.  I could pay that car off, but I wont because if I take a loan (with a 20% down payment and excellent credit) I will be able to invest the difference, make up for the interest % charge and then some by investing the difference.  This is why.. that way there's money to invest or buy other goods and or services while also continuing to use it for investment purposes.

That is how the purpose for which debt is incurred can significantly impact its consequences. Debt, when used judiciously and for productive purposes such as infrastructure development or investment in key sectors of the economy, can indeed yield long-term benefits for a nation and its citizens. Governments can create a more prosperous and sustainable future for their citizens by improving infrastructure, enhancing productivity, and stimulating economic growth,

Indiscriminate borrowing solely to finance day-to-day expenses or to cover budget deficits can lead to unsustainable levels of debt and potentially jeopardize the financial stability of a nation. Governments need to exercise prudence and foresight when borrowing to ensure that borrowed funds are invested wisely in projects that generate tangible benefits for society as a whole. While debt can be a useful tool for financing development and achieving national objectives, it should be approached with caution and responsibility to safeguard the interests of current and future generations.

Correct, while there are some people that seem allergic to debt as they have seen the effects bad debt can have on a person close to them, the truth is that debt can be useful if it is contracted for a reasonable purpose, so a government asking for money just to keep itself afloat is just wasting that money away and compromising the future of their citizens, but a government asking a loan to build a series of public works that will improve its infrastructure and will help the economy is doing the right thing.

An active bond market in your national currency is a benefit to all citizens and corporations, it encourages business investment and its easily a positive force and aid to liquidity.  Most countries live in fear of any kind of lack of liquidity that can occur that would starve participants in their economy.  Not all people involved will have capital and they may be productive if able to borrow but restricted otherwise.  Some traditional societies lend to each other privately but many places its a bank and the banking system generally will come from the top down so a government will always issue some bonds in order to aid traders in that currency.   I believe in private industry far more but generally a government will rate as the best rated debt and it rolls down in ratings from there down to casual debt.

Contrary to the common misconception of dictating policies, the World Bank fosters a collaborative environment. It extends loans, grants, and technical assistance tailored to each nation's unique needs and development goals. While conditions may accompany these financial instruments, they aim to promote sound economic management, empower poverty reduction, and facilitate sustainable development, eschewing a singular "capitalist" agenda.

The IMF plays a pivotal role in safeguarding global financial stability, offering short-term loans and policy guidance to member countries grappling with economic crises. Their interventions prioritize restoring macroeconomic stability, not solely fostering "cheap labor." Although some policies might emphasize fiscal discipline and debt reduction, the ultimate aim is to cultivate an environment conducive to enduring, inclusive growth and poverty alleviation.

Not because you can afford something, means you have to buy it because what's next after that ourchase? I view economy of a country the same as with a company's expenses. A company generates money but CEOs often borrow money from the banks whenever they are planning to re-branch for example simply because they want to revolve the funds as much as possible with overall maintenance and sustainance of the company. Same as with a country's money. There are a lot of continuous projects and or funding with different government organizations wherein a country's money should be alloted. Also, unfortunately, corruption could also be a reason on such act.

But again, the economy of a country is complicated; everything's should be running in long term which is why they have to borrow money if not from the worldbank, from other bigger countries. These wealth won't be paid for years and that interval should not be put into waste in order to sustain overall economic state.

Instead of just handing over the cash, they're more like development ninjas. They help countries figure out what they really need, like a fancy new dam to power their whole nation, and then throw in some extra knowledge bombs to make sure it gets built right. Think of it as getting the hardware and the installation guide, all rolled into one sweet package.

Sure, there's a loan involved, but it's not just about paying back the bill. It's about using that infrastructure to boost the economy, create jobs, and make life better for everyone. Like, imagine all the businesses that can pop up with faster internet, or how many families can get electricity for the first time thanks to that new power plant. Pretty cool, right?

Now, borrowing ain't always easy, and the World Bank makes sure countries can handle it. They're like financial advisors, checking budgets and making sure the loan won't leave the country swimming in debt. Plus, everything's transparent, so everyone knows where the money's going and how it's being used.

Yes it cost less to borrow than to print but I don't think that countries who borrow are often doing that because they want to import something or for such purposes of importation. They are mostly borrowing to carry on some capital projects in the home country. They borrow to solve some financial issues in the country, that is what they propose to do but they often times don't carry it out as such because the money end up in people's private account which is why every government that comes talks about borrowing because the projects needed to be done are not turned out to be done.

The answer is to diversify sources of funds even if a country is deemed capable, apart from that, its governance will be an example that can be adopted by borrowing countries in the reporting system.

Yes. We know that there are many conditions that must be met in order for an application to be accepted, but the worst is ongoing interest and debt payments. However, if the government has properly evaluated which program will be implemented and will have a good sustainable impact on society, I think it would be better to propose and implement it.

As economy demands, please what could cause an individual to have his/her sufficient funds untouched but craving to use the loaned funds to execute their personal interests projects?
It is thoughtful because it is believed that the loaned funds is usually comed with interests which probably if you have your own money spent it saves you from paying additional interest rates for loaning.

The debt of countries keep adding up due to interest rate even though it is low compared than borrowing money from private entities. Still how effective they make use of the loan money that can generate revenue to the government so they can pay back the loan but governments keep borrowing and let the next government to carry forward and this cycle keeps on going all the time.

Every country has to achieved its target goals and developments that the citizens are expecting from the country’s government. For that, the need to borrow money from the world bank may suddenly arise so they can provide the people’s needs to live a healthy and stress free life, so they can experience the benefits that the country is obliged to give to their citizens. However, there might be different issues regarding where the money is being put to, but rest assured the goal of each country’s government is to satisfy the longings of their citizens.