The money one country owes to another country, as a result of loans and/or a negative balance of trade. – a negative balance of trade means that country buys more than they sell
International Trade
Trade Barriers
the EU’s internal market is about removing barriers to free movement of goods, services, people and capital
Lends to countries with balance of payments problems – countries that can’t make their payments
Pushes for economic reforms – reforms such as allowing free trade or reduce wasteful spending
Reports on policies in member states
These are short-term emergency loans when a country is about to go bankrupt. Usually associated with LDCs, but recently Greece and Spain have consulted the IMF due to the Euro zone crisis.
What do the IMF and World Bank do?
World Bank:
Aims to help development by advising and lending – with many conditions – such as reducing wasteful spending or focusing on a particular area of production
Countries encouraged to lift import and export barriers, cut subsidies and remove price controls – encouraging free trade
These are longer term loans, used to put in place infrastructure or other big projects.
Criticisms of IMF
IMF only lends money if countries agree to:
Sell their resources cheaply
Cut public spending
Critics say this serves to increase the problems of poverty in poor member countries – many times the country ends up paying more money to pay off the debt than they invest in education or health care
Criticisms of World Bank
Loans depend on countries agreeing a ‘Structural Adjustment Programme’
Leads to rapid increase in price of goods in country
