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Relieving an improvished country of its debt would seem to

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Joined: 10 Apr 2011
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Relieving an improvished country of its debt would seem to [#permalink] New post 18 Apr 2011, 14:21
Relieving an improvished country of its debt would seem to almost unavoidably help the citizens of that nation. Indeed, health care and education spending is now grater than debt service payments in many countries(HIPC) that have been granted partial debt relief by the Heavily Indebted Poor Countries Initiative launched by the International Monetray Debt Relief Initiative (MDRI). Several factors, however, have kept these programs from becoming truly transformational.

Forr a nation to qualify for the HIPC, it must have a level of debt that cannot be managed through traditional means. The removal of this enormous burden means that badly needed resources can go to programs that aid needy citizens, just as is intended. However, the HIPC has strict rules that sharply limit this spending. In some case, teachers are not hired and HIV/AIDS tests are not administered because the sudden spending might lead to macroeconomic instability. This is a paradox that must be confronted: poor nations need to spend money desperately but wisely.

A more daunting obstacle is tha lack of a private sector in many of the countries that are served by the HIPC. Property rights may be virtually non-existent, Without individuals and businesses willing and able to invest resources in their own country, progress can be glacial. Outside investors are forced to deal not with business partners as such, but with government agencies ranging from the inept to the murderously corrupt. There is no guarantee that funds meant for a hospital or school will ever find their way to the intended destination, whether because of corruption or the sheer difficulty of moving goods around in a place that is, as is so often the case in truly poor countries, at war.

Debt relief remains an important tool in reducing the terrible suffering that affects so many people in the underdeeveloped world. However, it is not enough to clean the slate and say ,"start anew". Without the willingness on the part of the governing body to allow its citizens to take part in their own development, and without the right balance of emergency spending and careful investment, unmanagement debt will return, as evidenced by nations that have been borrowing money faster than their debt can be relieved.

1. Which of the folloring titles best summarizes the contents of the passage?
A. Debt Relief as a Tool for increasing Private Investment in Impoverished Nations.
B. The difficulties of Implementing Debt Relief in Very Poor Countries
C. Obstacles to Channeling Aid to Needy Destinations in Vey Poor Countries.
D. the Inherent Flaws in Debt Relief Programs
E. HIPC: Well-meaning, but insufficient

2. Which of the following was not mentioned as a difficulty associated with debt relief?
A. long-term needs have to be addressed at the same time as more immediate one.
B. Nations that need debt relief are often in the midest of violent conflicts
C. Debt relief can swiftly be replaced by new debt.
D. Private investors in very poor countries are often corrupt.
E. The pace of development in poor nations can be extremely slow

1. I chose E since I found the disadvantage of HIPC from the last paragraph.

2. I chose B since I didn't find anywhere mentions "the midst of violent conflicts" from the passage. Or I probably am not very sure about the meaning of this phrase, can anyone explain this for me?

Answer 1:
[Reveal] Spoiler:

[Reveal] Spoiler:


Yvonne Hao

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Re: Heavily Indebted Poor Countries [#permalink] New post 18 Apr 2011, 23:15
Expert's post
When you are given a general question such as #1, make sure that your response covers the entire passage, not just one portion. The passage is about difficulties with debt relief in general. It is not restricted solely to the HIPC initiative.

"In the midst of" basically means "in the middle of," so B is just saying that the countries in question are experiencing violence. This is mentioned at the end of paragraph 3. Corrpution is mentioned in the same paragraph, but only in reference to government agencies, not private investors.

I hope this helps!

Dmitry Farber | Manhattan GMAT Instructor | New York

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Re: Heavily Indebted Poor Countries   [#permalink] 18 Apr 2011, 23:15
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