Topic: Why does a country borrow money from the world bank even when they can afford it - page 5. (Read 1187 times)

As much as we don’t see contentment with the progress we are seeing in ourselves, same also applied when running a country. There’s always a need to improve and that’s I think what every country is supposed to do. With that, taking a loan from the world bank could give us the best advantage aside that it only offers low interest funds, it could also mean a lot to continue the said progress and development that we are opted to see and experience in our own country. And I guess majority of the countries are exposed to taking a loan, as long as the country itself is able to pay it back from its own profit and revenues.

There are two reasons i can think of why countries who can afford some projects still choose to borrow from the world bank:

[1] It’s just not enough
Maybe the government has allotted the money for another project and they want to create another one however they are not quite sure if the money they have will be enough to execute the project so they borrow from the world bank

[2] Corrupt officials
It will really be not enough if the government officials seated on position are taking the money for themselves instead of trying to figure out a way to use it for the improvements of the country

At least the countries can and individuals cannot. Perhaps it also has to do with how much foreign reserve the country has in store and as such it serves as a collateral to get loans from world banks who would make profit from the interest on the loans. Else, how do banks make profit.

It could also be the loans are sort of future investment from other countries to have an influence in the borrowing country in terms of their products and initiative being welcomed to flourish as well as investors coming in to set up businesses that would be of benefits to them and the borrowing nation .

Whatever be the case, the leaders are to be held in accountability for such decisions to get loans from the world bank even when they can afford it.

It is actually very difficult to say, because it is a decision of the leaders of a country. Even after a country has enough money, they borrow money from the World Bank. World bank gives loan for development and this loan has many facilities which corporate banks will not give loan at this interest. And so the government tries to borrow money to expand the development of their country.

The government tries to provide more benefits to the citizens by subsidizing the taxpayers' money in other sectors, and that is why they are interested in borrowing money. But it is true that there are many conditions that have to be followed completely to take a loan from the world bank, as a result of which the problems that arise due to those conditions directly affect the citizens.

There are too many reasons for this, the politicians in turn may want to build some public works that may need an amount of money they may not have at the moment, so borrowing money is a must for them, it may be argued that this is bad as if the money was saved then this could be done without getting new debt, but the benefits of building that project as soon as possible could be too good or politicians may want to build this during their administration, so in the future they can claim they are the ones that made this and give voters more reasons to elect them over their competition.

They all will have their own reasons but mostly countries borrow from the World Bank because even if they have the financial capacity to pay for things without external assistance, borrowing from the World Bank allows them to access funds at lower interest rates and with longer repayment periods. This can be more favourable compared to borrowing from commercial lenders. The World Bank provides technical expertise & support to help countries implement projects effectively. Borrowing from the World Bank can signal credibility to other investors & lenders, attracting more investment & fostering economic growth.

There’s always a room for improvement, even if we are already seeing such countries in progress. The reason why most of the countries still taking a loan from the world bank so that they can continue providing their people the quality services that they deserve, like building more infrastructures that will cater the different needs of the people, and giving the people the continuous financial assistance most especially for those who are actually less unfortunate ones.

However, the officials personal interest to also benefit from the borrowed money is inevitable. Even if these people will deny it, but we all know as to where they are getting their funds to buy instant luxury cars and services for their own family benefits.

You say this is happening, and maybe it is, but why don't you give an example of these countries that are in such dire straits that they have to borrow when they can supposedly afford it already? I can't say I know of any examples, the world bank is the equivalent of a pay day lender, no government wants to go cap in hand to them as it admits their country has hit rock bottom. There are often some quite heavy strings attached to unlocking loans from the world bank, like concrete steps and law changes that could be very uncomfortable for certain established powers, like oligarchs who might have their little fiefdoms threatened and try to strike back at politicians. You might think you live in a productive country, but it's a race to the bottom and hard to be profitable these days.

There are many reasons why governments make loans to international financial institutions - mostly because they need to budget more than their domestic income from various sources. Sustainable project financing is the goal of why governments make loans - but unfortunately ineffective management backfires on a country to the point where they have difficulty repaying the loan.

Not all governments get loans by international institutions of their own wish- but in some cases these financial institutions also offer several special benefits to the government of a country in order to make a loan. Low interest rates, diplomatic relations and a few other things are also reasons - but in most cases, the government get the loans because it needs more funds.

I want to tell you an example of my country, it borrowed money from world bank in 2000 to build national highways and till date they are collecting toll charges from travelers stating it's to pay back the world bank for the loan which we had taken 24 years ago wherein no one has clarity how much has been paid and what's the remaining amount and when people started questioning they started dodging the questions stating it's for the maintenance of highway, etc some irrelevant reasons. It's just because they want more money and loan from world bank is just an excuse to collect more taxes from people. It's plain greed.

I am no expert about this topic, the thing I know why the government borrows money is to supplement their current and incoming budget to have a smooth operation of their programmed budget for the year activity.  In order to broaden the information I look for the answer on the internet and among those that I read I find this article[1] to answer @OP's question in a simple but clear manner.

The article stated that :


This image from the article simply show the reason why the government borrow money:

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[1] Why does the Government Borrow? by Tejvan Pettinger

I completely agree because there will probably be some spillover effects from the worldwide recession, even in countries that are not directly affected. As you pointed out, there may be major issues later on if a nation's debt increases more quickly than its real GDP. It's important to keep in mind that, even if a nation can weather an economic storm, its trading partners might not be as fortunate. Therefore, even if a nation has a strong economy, the global recession may still have an impact on its exports.

To the best of my knowledge as regards to reasons why a government borrows money from world bank is as a result of economic crisis within that country so they actually use the money they borrowed to sort out some financial needs of the country not actually that the country doesn't have money but because the money they have in the Treasury isn't enough to settle all parastatals of government hence the reason for borrowing in other to keep the government running so that they can pay workers, build projects and fund other sectors of government in other to bring about development in the country pending when the government will generate enough revenues to pay back the loan they took.

Sometimes it isn't that the country doesn't have money to run the government but it might be that they want to do some extended budgets so in such a situation they can also result to taking loans in other to fund that particular budget. Yeah some countries that there economy is steady always have excess accounts, these excess accounts stands as for any other expenses outside the countries annual budgets so if their is any other further expenditures by the government then they can access the excess account.

A government that doesn't have good economic team can most times result to accumulating much debts due to borrowing from other countries and sometimes these debts are being inherited by their successors which will actually destabilize the successors government because instead of thinking ahead he might keep repaying debts incurred by previous administrations and incurring too many debts hinders the growth and development of a country.

It is cheaper to borrow money than to run the cost of printing. For example if you want to print new currency in a country, it is not very cheap especially when the quantity you want to print can as well be given to you/country as borrow and you can quickly get onto the project that it is meant for. In order words, it is faster to use borrowed money to start a project than going through the legislative bottle kneck of printing money. Therefore, apart from the fact that it is cheaper in cost to printing money, it is faster to get things done with the money.

Another possible point is that it is targeted on a particular project or certain project which gives room for accountability assuming it was properly utilized without corruption and going into private pocket.

Another point again is that it makes lesser noise and doesn't raise curiosity in the public sphere only that money is being borrowed than when a government embarks on printing money. If government embarks on printing money, it creates more fear, doubt and uncertainty about what is happening to the economy of that country, perhaps they are being bankrupte or such kind of fear.

Government doesn't really like to print money or it is not really a good economic policy to print money if it is not expedient.

Then , when money is printed, it could increase the inflation rate if not properly managed and controlled. So, it is more serene to hear of borrowing than printing economically.

Governments need revenue to operate and fund services such as healthcare, education, and the military. This revenue usually comes from taxes paid by citizens and businesses and from levies on certain goods or duties on imports. However, when the spending of the government exceeds the income it earns, it leads to a condition called a deficit. To make up for this difference, the government needs to borrow money.

Similarly, when there is a desire for expansion or development in other projects or infrastructure, the government allocates a portion of its revenue for that purpose. If the allocated funds are not sufficient, the government resorts to borrowing to finance additional projects and improvements.

Sometimes the real cause of why some countries still borrow money while dey can afford it, is Because of bad and greedy leaders. The causes of this things is when the leaders shear the money or alocation generated from government investment and tax, without saving the money or having emergency fund. When they leterarily spend all the money generated from government revenue without keeping some portions for other purposes. If they continue this strategy you see that the country will be poor and there reserved fund becomes minus, and leaders come and go without planing on how to pay the loan, rather think of borrowing and paying till the economy is messed up.

What I know is that a country borrows from the World Bank for a project that will grow the economy of their country. And they are given a nice interest given by the borrower, like the US country; they offered a nice interest.

Even our country borrows money from other countries for infrastructure projects called build, build projects. That's why there are other countries that borrow money, and then the corrupt official governments just steal it.

The World Bank does not impose its policies on countries, but rather it is closer to a cooperative society, but many confuse the World Bank with the International Monetary Fund, which is considered a financial institution whose primary interest is implementing certain capitalist policies in exchange for giving loans to countries and pledges for more whenever those countries commit, because they believe that they gave loans in return, and therefore it is It is wrong to spend it on policies such as monetary support, providing goods to citizens, or strengthening the value of the local currency.

The International Monetary Fund implements decisions aimed mainly at creating more cheap labor and stable countries.

Each country has certainly its own needs to provide progress and development that the citizens are much needed. This means that no matter how productive and developed a country is, there are still essential projects needed to promote the welfare of the individuals, to eradicate poverty as much as possible, and to provide job opportunities to jobless people so that they can feed their own family without relying on the government aids and assistance. All these needs will continue to grow if the country’s population also grow, hence the need for a country to take loan from the world bank is certainly a must.

It’s quite absurd for a country to borrow money from wherever for whatever reasons when they’ve got the money themselves to do so. Ask yourself, would you go ahead and take a loan from the bank for a project when you’ve got the amount needed and more?
 
No country would posses sufficient money and still go ahead to borrow money from a financial institution knowing they would have to repay with some interest.

Asides all of that, these financial institutions that one would say are readily available to bailout and give loans to countries going through an economic turmoil would then have a certain level of influence and say in the country’s economic affairs . And the influence to be had is what’s really vital to these institutions.