Question

In: Finance

What are the causes of poverty and instability in least developed countries?

What are the causes of poverty and instability in least developed countries?

Solutions

Expert Solution

The causes for instability and poverty in countries that are less developed is shown below:

  1. Domestic resource mobilization- The least developed countries are not able to build capacity in order to locally mobilize their financial resources. The finances can be raised in least developed countries if taxes are collected and managed effectively by the government. It stand to be inevitable that least developed countries still have a heavy reliance on assistance from foreign countries in order to harness opportunities and enhance institutional and technical capacities for mobilization of resource in a n efficient manner.
  2. Lack of economic diversification- Least developed countries have high dependencies on primary commodities due to which they experience high volatility in prices of the commodity due to which there exist imbalance in the economic instability and balance of payments.
  3. Shortage of means of implementation- least developed countries generally come across lack of support at a global level when it comes to means of implementation including lack of token technology transfer, divergence between monies actually delivered and pledged financial assistance and lack of reform to persistently unfavorable trade regimes.

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