Debt

What is the debt?

A debt is when someone you need money. Debts get bigger every week if you are also responsible "interest". Interest is a supplement on the original debt.

How does it work?

Remember Tom's Yasmin borrowed bike in exchange for a CD? She planned to buy the CD from the wages of his paper round. But Yasmin has forgotten that if his bicycle has a flat tire, it can not turn paper!

Tom Yasmin offers to rent his bike for a week so that it can continue to turn paper. However, the rent he is charging half his salary. He also said that, for every week that passes when Yasmin has not repaid the debt, it needs to buy an extra CD, as a fine or "interest".

So, Yasmin is jammed. She is only half his usual wages, and this is not enough to get his bike fixed or buy the CD to be Tom. And now, it has another CD Tom! Each week, the debt will grow increasingly important until there's no way, it will never be able to earn enough money to repay.

This is an example of the debt.

Why do some countries have debt?

In the past, the poorest countries borrowed money from richer countries. They were not able to pay the money. One of the reasons why they can not pay for it because it is unfair trade rules means they can never make as much money as they need. To make matters worse, they also have interest payable (surcharge) on borrowed money. This means that the amount of money they need grows daily. They may not pay for such things as schools and hospitals because their money is spent on their debts.

In 2005, the G8 (group of leaders of the eight richest countries in the world) have agreed to cancel the debts of 35 of the poorest countries. This has enabled these countries to pay for thousands of doctors and teachers and make life a little better for those who live in the poorest countries.

But after years because of the money, there is still a huge job to do. There are also many countries that have not yet dropped their debts.