What is a good debt relief program?

What is a good debt relief program?

What is external debt?

The institutions of the regulated financial system, cooperatives and social security institutions may, within the limits established in this Law and other applicable legislation, consolidate debts to workers through financial products and ensure their repayment through payroll deduction, which guarantees risk mitigation.

Debtors may freely select the financial institutions with whom to contract the debt consolidation financial product. For these purposes, the financial institutions must provide the debtor with information regarding the conditions of the financial product to be contracted, so that the debtor may make an informed decision.

Multilateral Debt Relief Initiative

U.S. Treasury Secretary Janet Yellen on Thursday called on Congress to approve funding for multilateral agencies to help finance debt relief programs for low-income countries.

“It’s going to be much harder to deal with global security threats, such as climate change, if much of the world can’t make the effort to transform their economies to sustainable ones,” she said.

The World Bank and the International Monetary Fund called on the G20 countries, of which the U.S. is a member, to establish a debt suspension plan to help lower-income countries “focus their resources on fighting the pandemic”. The plan benefits 73 countries in the world, including Honduras and Nicaragua.

Hipc

Foreign creditors, meanwhile, may be banks, governments of other countries or international organizations that provide financing such as the International Monetary Fund (IMF) or the Inter-American Development Bank (IDB).

The effects of external debt depend on the reasons that justify it. Thus, if the indebtedness was used for investment, it will have a positive effect since it will allow for greater future development, which would have been impossible without being able to count on the resources quickly.

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On the contrary, when the indebtedness is explained by poor management, the effects can be disastrous. This is because the contracted debt (plus interest) will have to be repaid, even if no new sources of income have been generated.

Developing countries, especially those in Latin America, saw in this abundance of external resources the possibility of acquiring loans at a very low interest rate and took on large sums of money in debt. However, this money was not used for investment, but rather to implement expansionary policies without a justified return.

Bilateral debt

The institutions of the regulated financial system, cooperatives and social security institutions may, within the limits established in this Law and other applicable legislation, consolidate debts to workers through financial products and ensure their repayment through payroll deduction, which guarantees risk mitigation.

Debtors may freely select the financial institutions with whom to contract the debt consolidation financial product. For these purposes, the financial institutions must provide the debtor with information regarding the conditions of the financial product to be contracted, so that the debtor may make an informed decision.

What is a good debt relief program?
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