Emergence of a CrisisThe encumbrance of debthas long been an issue of international importance. While it has been observedthat these debts have been developed over the course of international disputesin the mid 20th century, the causes of the current debt crisis arecomplex, rooted in economic policies and development choices going back to the1970s and 1980s. The quadrupling of oilprices in 1973 Organization of Petroleum Exporting Countries (OPEC), led to ascenario wherein nations deposited much of their new wealth in commercialbanks. The banks, seeking investments for their new funds, made loans todeveloping countries, often hastily and without monitoring how the loans wereused. Some of the money borrowed was spent on programs that did not benefit thepoor, such as armaments, failed or inappropriate large scale developmentprojects, and private projects benefiting government officials and eliteminority. Meanwhile, as inflation rose in the U.S.
, the U.S. adopted extremelytight monetary policies that soon contributed to a sharp rise in interest ratesand a worldwide recession. The irresponsible lending on the part of creditors,mismanagement on the part of debtors, and the worldwide recession allcontributed to the debt crisis of the early 1980s.Developing countries were affected the most inthe worldwide recession.
The high cost of fuel, high interest rates, anddeclining exports made it increasingly difficult for them to repay their debts.During the rest of the decade and into the 1990s, commercial banks andbilateral creditors (i.e., governments) sought to address the problem byrescheduling loans and in some cases by providing limited debt relief. Despitethese efforts, the debt of many of the world’s poorest countries remains wellbeyond their ability to repay it. Rise of Debt in Islamic Republic of IranThe Islamic Republic ofIran stands on a position where it affirms that international debt is acolossal impediment to the path of a nation’s path to progress as repaymentsdivert money directly from basic human needs such as health care and education,and fundamentally undermine government’s efforts to promote sustainabledevelopment.
Along with recessionand spike in oil prices, arrived international isolation and economic sanctionsimposed by the United Nations and the European Union on Iran which deterioratedthe economic situation further from the damage it received from the IranianRevolution and Iran-Iraq war. Although these events led to the politicalstability in the nation, they considerably deteriorated the economy of Iran.The later portion ofthe 20th century proved to be an economically challenging period forthe Islamic Republic as international debts continued to rise at an alarmingrate. The Ameliorating Situation and National GoalsDespite the challengesfaced by the nation, major elements of the money and credit policies areincorporated into the five-year economic development plans. The fifthdevelopment plan, for 2010–15, was designed to delegate power to the people anddevelop a knowledge economy. The plan is part of “Vision 2025”,a strategy for long-term sustainable growth. The sixth five-yeardevelopment plan for the 2016–2021 periods only defined three priorities whichinclude “the development of a resilient economy”. These efficient economicpolicies and changes have led us to observe the following desirablecircumstances:· In 2013the external debts stood at $7.
2 billion down from $17.3 billion in 2012. Overall fiscaldeficit is hasdeteriorated to 2.7% of GDP in FY 2016 from 1.7% in 2015.· From 42.29% in 2015, wehave now moved to 30.
76% in the end of 2017 and further expect to go to 25.99%in 2022 in terms of national debt in relation to gross product.· Facilitating foreign financing has been among the top itemson Iranian President Hassan Rouhani’s agenda since the signing of the nucleardeal in 2015. Furthermore, the risingissuance of various IslamicSukuk and, in particular, Islamic Treasurybills in the past three years in Iran is seen as evidence of thesuccess and allure of the Iranian debt market. Global Scenario and International GoalsAlthough the much appreciatedcancellation of debts World Bank, IMF and African Development Bank were carriedout (2005), only nations that qualify for the Heavily Indebted Poor Countries(HIPC) will have their debts cancelled. Criticism was raised over theexceptions to this agreement as Asian countries will still have to repay debtto the Asian Development Bank and Latin American countries will still have torepay debt to the Inter-American Development Bank. Between 2006 and 2010this amounts to US$1.4 billion for the qualifying Latin American countries ofBolivia, Guyana, Honduras and Nicaragua.
Moreover, following thedata in the World Bank’s global development finance 2012 report shows total external debt stocks owed by developing countries increased by$437bn over 12 months to stand at $4tn at the end of 2010, the latest periodfor which data is available.The latest African EconomicOutlook report – published by the African Development Bank, the Organizationfor Economic Co-operation and Development, and the UN – says it is still”very difficult to assess whether African countries which have benefitedfrom debt relief are falling into debt again Developing countries spend a very highpercentage of foreign earnings on debt interest payments, leaving little roomfor capital investment. Writing off debts enables them to invest ininfrastructure leading to higher economic growth and the developed world willbenefit from strong third world countries because they are potential exportcountries.Therefore,in conclusion, the Islamic Republic of Iran wishes for all nations to cometogether in combating an issue aiming atachieving the cancellation of the external public debt in third worldcountries, combating the plague of odious debts, supporting internationalorganizations and policies reinforcing solutions to the issue, subsequently breakingthe spiral indebtedness by setting up models of socially fair and environmentallysustainable development and looks forward to addressing this issue in the WorldBank.