The issue of finance has been the Achilles heel of third world countries irrespective of the natural resources they may have in their coffers.
3rd world countries as they are called are the countries that stayed neutral during the cold war as they did not take part in the war and neither joined forces with any of both warring parties.
Although the term 3rd world country is no longer used often as it use to be, it still remains the name tag given to them to identify them as countries that neither joined NATO forces nor signed agreements with the communist bloc either. They are now referred to as developing nations which many think sounds more acceptable. Most of these countries can be found in Africa but we also have a few of them in continents like Asia with very low or little signs of development yet they have been in existence for more than two decades.
Examples of third world countries include:
The list is quite long and about over a 100 countries make up the third world countries.
Budgets and state finance in 3rd world countries
Natural resources: some of these countries like Nigeria, Rwanda and the rest have natural resources like oil, tin and gold which is used as a medium of earning foreign exchange which brings in income to fund the state finance. However, since all of the third world countries have been reported to be amongst the most corrupt in the world, most of the revenue generated from the sale of these natural minerals don’t make it to the national purse but line the pockets of the various public office holders who siphon the funds and save it in offshore accounts where the banks make use of it while the nation falls into more anguish caused by the rising poverty rate and debt portfolio.
Grants: Different organizations like the IMF, ADF and World bank to mention a few give grants which is often called intervention funds to third world countries to help them fund various projects which can help the citizens live a better life. An example of this intervention fund is the donation made to developing countries to help achieve their millennium development goals. Needless to say, most of these monies was unaccounted for and were siphoned into private pockets with thousands of projects left unfinished. This has prompted most world financial bodies to refrain or become hesitant to hand over the money to countries without supervision of how it was made which will in turn curb the corruption in play.
Recovered Loots: These are monies stolen by political office holders but recovered from banks all over the world and returned into the state coffers. Oftentimes, it is used to fund budgets and execute emergency projects. An example of this is the recently recovered Abacha loot which was recovered from an offshore account in Europe.
Loans from international bodies: This is the most common source of budget funding in third world countries. Developing countries keep taking loans from financial bodies year in year out to fund their budget and state expenses which has always been more than the previous year. Third world countries are yet to learn and understand the fact that the loans they take will keep increasing with interests piling up and they have refused to reduce the running cost of governance in the state.
Needless to say, finance in third world countries is a mess as the countries strive to maintain a good GDP and also try to service their external debt portfolio as well which might stretch them out overtime. The willingness of global financial bodies to give loams to these countries too is quite alarming as they hardly turn down loan requests.
Nigeria recently received a go ahead to take a loan of $5 billion to fund its reoccurring expenditure which could have been cut by half if only the budget planning office can look for areas to cut costs.
Tax: This is a huge money making avenue for the funding of budget and expenses of the government. Individuals and cooperate bodies are taxed based on different factors. While some country’s tax is charged based on income while some charge theirs based on government policies.
Although developing countries make a lot of money through tax, but still, it seems not to be enough as a lot of cooperate organizations and individuals still avoid paying tax and exploit loopholes in various tax laws to cheat the government. To curb this, developing countries should revisit their tax laws and also tighten their grip and build secure database that is airtight which will enable them identify and go after tax defaulters.
Developing nations will continually base their budget finance on debts and will be indebted to developed nations and global financial bodies as long as they always look outwards for their source of funding for their yearly expenditure rather than look inwards at their resources and how best to optimize it for financial liberation from the claws of reoccurring debts.