External debt in developing countries magnitude and trends

The acceleration of development is a pressing matter for poor countries since the extent of inequality in the productive capacity between the developed and underdeveloped countries has become more acute. In this regard, external capital has been a significant role affecting the economies of developing countries to a large extent. But, the experience has shown that during the last four decades, most of the developing countries have not been able to reap the benefits of foreign finance and have become indebted to international financial institutions, commercial banks and developed countries. A large chunk of their resources goes to service their debt. The present study examines the extent and trends in the burden of external debt and debt service on developing countries and suggests that these economies should use external debt for productive purposes so that sufficient amount of resources may be generated so as to pay back the debt well in time. A shift from private to official sources can also work positively in this regard.