Which strategy involves reducing a country's external debt obligations to free resources for development?

Which strategy involves reducing a country's external debt obligations to free resources for development?

• A. Industrial Development as a development strategy
• B. Fairtrade as a development strategy
• C. Debt Relief as a development strategy
• D. Microfinance as a development strategy

Answer: (C)

Debt relief directly lowers a country’s external debt payments, freeing resources that would otherwise go to debt service for development purposes. When a government borrows from foreign lenders, part of its revenue must cover interest and principal repayments. Reducing or cancelling part of that debt, or extending repayment terms, lowers debt service costs and frees funds for health, education, infrastructure, and other development needs. The other options aim at different development routes—industrial development grows manufacturing, Fairtrade improves prices for producers, and microfinance provides small loans to individuals—but none directly reduces a country’s debt burden to free up resources for development.

Debt relief directly lowers a country’s external debt payments, freeing resources that would otherwise go to debt service for development purposes. When a government borrows from foreign lenders, part of its revenue must cover interest and principal repayments. Reducing or cancelling part of that debt, or extending repayment terms, lowers debt service costs and frees funds for health, education, infrastructure, and other development needs. The other options aim at different development routes—industrial development grows manufacturing, Fairtrade improves prices for producers, and microfinance provides small loans to individuals—but none directly reduces a country’s debt burden to free up resources for development.