Unveiling the Veiled Contracts: An In-Depth Analysis of Development Loans and their Implications on Developing Economies Macroeconomic Interdependence

Author(s)

Muhammad Rayyan Mir ,

Download Full PDF Pages: 01-05 | Views: 180 | Downloads: 59 | DOI: 10.5281/zenodo.8305278

Volume 12 - August 2023 (08)

Abstract

In recent years, the world order of developing nations has embraced the prospect of macroeconomic interdependence through resource-backed financing (i.e, development loans). This isn’t, however, a recent conundrum in any capacity. Development loans date back to as long as the start of the Second World War (WWII) where developed nations began to provide financial assistance to their former colonies in an effort to support their macroeconomic development. (Latham, 2023) Following the end of the war, the Bretton Woods Conference established the International Monetary Fund (IMF) and the World Bank in 1944. Both have been an instrumental role in promoting development finances.The fundamental problem of development loans is attributed to the contractual secrecy promoted by their host institutions. There are inappropriate amounts of information provided about each loan to developing economies, who don’t have much ground to negotiate. Development loans have long been criticized by these economies as only aiding the macroeconomic stability of the nations and neglecting the poor and burdened of smaller nations. As a result, regional banks were set up in the 21st century to aid to continental development, including microeconomic provision of infrastructural development.This paper includes: defining the parameters of ‘development loans’ and ‘developing economies’, presenting contrasting perspectives, providing implications of said subject, establishing an assessment criteria, and providing forth a personal reflection.

Keywords

Veiled Contracts, Development Loans, Developing Economies, Macroeconomic Interdependence

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