Political economy Term Paper Example | Topics and Well Written Essays - 2000 words

Political economy - Term Paper Example Not only do these nations face internal challenges but they also have to contend with massive amounts of debt that they owe to developed countries. This issue will be the focus of the rest of the essay, which will elaborate on the merits and demerits attached to the policy of totally writing-off the debt owed by the most impoverished of Third World nations. Firstly, there is a strong case to be made for total debt relief from a post-colonial reparation perspective. Most countries that presently fall under the Heavily Indebted Poor Countries (HIPC) category are former colonies for European imperialism. The HIPC group is predominantly comprised of countries from Africa and Asia. A primary reason for their prevailing impoverished economy was the exploitation suffered by them during the colonial period. Similarly, the prevailing political chaos in most of these countries is partly due to the abrupt transition of power from the imperialists to the local elite – a transition that did not make provisions for the establishment of democratic institutions and processes. The HIPC Initiative conceived and proposed by the World Bank and its agencies is one of the methods through which Third World Debt could be reduced. In other words, the initiative is intended to â€Å"release resources for poverty reduction, increase incentives for reform s, and remove a deterrent for both domestic and foreign investors† (Cappelen, et. al, 2007, p.69)). According to the World Bank, as of June 2006 "nominal debt service relief of more than US$59 billion has been approved for 29 countries through the HIPC Initiative, reducing their Net Present Value of external debt by approximately two-thirds. Of these countries, 19 have reached the completion point and have been granted unconditional debt service relief of over US$37 billion." (Cappelen, et. al, 2007,