Why does a country borrow money from the world bank even when they can afford it

[icalical]

One of the possible reason is that they use the money to buy/import some stuff from other country, this transaction usually done with either USD or the Seller Currency, the country who are willing to buy can't print those currency, so they either need to buy it with the currency of their country but if they do that it will hurt the value of their currency, so instead of printing money to buy other country's money that might cost more for their economic, borrowing USD from the world bank will cost less.

[bettercrypto]

Most countries owe money to the World Bank. Now the question is: why are they doing this? Some of the reasons why a country borrows are so that they can improve their economy and reduce the percentage of poverty in their country.

And the money that will be loaned to them may be used for infrastructure; it may also be for private sector development; and it may also be for social programs such as healthcare, the social safety net, or education. Now, why are they borrowing money from the World Bank? Some of the reasons are that what the World Bank gives is low in terms of interest rates, the periods of payments that are given to debtors are long, and the conditions that the World Bank gives to debtors are also very flexible.

[kryptqnick]

My country is economically weak, so we definitely need those loans to at least stay afloat while trying to build a normally-working economy. But of course, strong countries also take loans. I believe the main reason is not economic improvements but international collaboration. Taking loans and then paying back means building up mutual trust. You wouldn't give a loan to someone you don't trust, and you wouldn't take a loan from someone like that either. So it shows faith in one another, fosters cooperation.
Moreover, if a country pays its debt obligations regularly and always in time, it builds up its own positive reputation, kind of like how in some countries, it's very important for individuals to have a positive credit score, and it's considered way better than zero credit score.

[DrBeer]

The answer is quite simple: if the state needs large infusions/investments, with low interest rates, a long repayment period, and loyal conditions - it’s profitable! More precisely, it is more profitable than withdrawing huge funds from the country’s budget, or printing unsecured money.
Lending is a long-standing practice with limited resources. This applies to both states, businesses, and ordinary residents.

[qwertyup23]

Question: Why does the independent, developed and  productive countries still borrows money from the World Bank even when they have enough to execute their excused reasons given why they have to borrows the money?
I am interested about this because in my country, we are independent and a productive country with revenues ought to be contented enough to execute the projects in demands of what they still borrows from the World Bank for and yet there is no economical improvements in the country instead we are running economical backwards.

I think this has something to do with the current state of the country that borrows in the World Bank.

For example, if a third-world country is struggling with their finances, they can borrow money from the World Bank in which the latter offers zero to low interest rates. Additionally, borrowing from the World Bank can also be an opportunity in the country if the details of the loan are generous.

For example, a poor country may be offered by the World Bank zero to little interest rates which can be payable for the years to come. This does not only help that poor country but it also gives them the opportunity to create various infrastructures that will benefit them long-term.

To answer your question, I guess if the World Bank offers no interest rates on their loans, that can be quite an attractive offer. Even if a specific country has a positive revenue, it does not hurt to ask for a little more cash, right?

[Assface16678]

This is  where banking comes in and how important the banking system is in this world. You see, yes, maybe a developed and advanced country could afford their expenses, but believe it or not, they still need to borrow money from the World Bank. This is because not all the costs are done inside the country; some of the money they borrowed will be used for foreign transactions, and the country's funds are not enough to sustain that because if they did use all the funds in a country, then there would be no circulation inside the country. That's why I understand or believe that no matter how powerful bitcoin or cryptocurrency is, they can't replace the banking system. Yes,  maybe crypto will be implemented, and I believe and am hoping for that, but replacing other things as important as the banking system is what I don't believe will happen.

[Agbamoni]

I think your misunderstanding something here. A person or country wont take a loan if they know they have the money. Obviously most countries may have the availlable resources that would generate the amount or even more of what they want to borrow from the world bank but it will require sometime to be able to convert those resources to physical money. Which we know that the government needed this money urgently to carry out some projects in the country. But my only annoyance is that most of those projects are for selfish motives of which the loan is taken in the name of the country and not the government officials

[jrrsparkles]

Question: Why does the independent, developed and  productive countries still borrows money from the World Bank even when they have enough to execute their excused reasons given why they have to borrows the money?

You are asking a hypothetical question because no government had enough money to execute all the projects they promised/wanted for the people or else no one in this world will be struggling due to financial issues.

Developed countries may have more revenue but they also may have more tasks to do, so they never can find all the money that is needed to complete everything they started so they ask loans from international institutions.

[Kelward]

It's ok for a country to borrow so far they're using it for infrastructural purposes, from my understanding it's not necessary that a country should use the money in their reserve to execute any meaningful projects, because it's good to always have money in reserves, in the case of emergencies. But problems arises when a government will borrow money from world bank for a project, in the end the money will be embezzled by government officials, instead of using it for the purpose that it was borrowed. So the problem is not to have sufficient reserve and borrow for projects, a government can decide not to touch it's money and borrow, problem is corruption, they'll embezzle money borrowed and leave the responsibility of paying back to the next regime.

[|MINER|]

A country borrows from the World Bank only when they do not have enough money in their reserves.  If it happens that a country needs 100$ to implement a big project but soccer has 100$ in reserve, then it has to take a loan from the World Bank. Because if the reserve is empty, it can't be done anymore. Because a country has various tasks and  Finance is needed in various sectors.

[beerlover]

Question: Why does the independent, developed and  productive countries still borrows money from the World Bank even when they have enough to execute their excused reasons given why they have to borrows the money?
I am interested about this because in my country, we are independent and a productive country with revenues ought to be contented enough to execute the projects in demands of what they still borrows from the World Bank for and yet there is no economical improvements in the country instead we are running economical backwards.

Because it’s free money. World Bank can’t do anything aside from increasing the debt and interest if the country can’t pay it all on the given due date. World bank can’t size country nor its property while the country can pay only the interest while they can still borrow money.

They are just creating debt out of thin air just like fiat that doesn’t have any real value. Think about this, If someone will lend you big money without any risk of seizing your property you have a the whole time to repay it even for a lifetime do you think you will not  get the offer. Besides all this debt will be useless if WW3 occur so why not borrow and invest it to your country.

That is not the point, "free money" is not as free as you might think, if you get a loan and then do not pay it back, you will never be able to get another loan, until you fix the situation. This is why nations usually pay it back, even if it takes years and a lot of interest, they try to pay it back, and very few hasn't so far. The point of getting a loan instead of paying right away, is the fact that inflation exists and you could make money from it and you could pay it back with the money that helped earn income.

So let's assume you get 100 billion in loan, you build an airport in 2 different cities, giant ones, one for travellers, one for cargos let's say. You have to pay 5 billion a year, for 25 years, which makes it 125 billion paid with interest, but you make 5+ billion with those two airports, so suddenly you did not spend a dime to build them.

[Mpamaegbu]

I guess, countries that aren't in financial distress may want to borrow from international organizations to increase their interactions in the global space. Yep, that's right and don't think that's a stupid way of getting cosy with others. Being on the borrowers' list puts out the name of such country in the face of others and easily paints them as needing aids. One way of being relevant is being on the lips of others, whether for positive reason or not and these countries achieve that through this. Again, look at what happens here in this forum with members taking out loans. Not every member who's asking for loan here is in dire need of it. Some do it to up their trust score while others may be doing it to get cosy with the creditors and gain their trust.

At every point in time, everyone has their motif for doing whatever they're doing.

[Mate2237]

Op I must comment you on this topic, I love the topic but Nigeria is not developed or advanced country and I will try my best to explain your question. There are two giant financial institutions in the whole world and they are: IMF also known as International Monetary Fund and World Bank. And these financial institutions are all own by USA but to make it subtle to look like a fair institution to all, they just shared some departments to other countries to handle but everything is handled by them. And these institutions are created to underdeveloped Africa only.

They give loan to African countries with very big interest to repay back. And they are sometimes they even force African leaders to collect those loans so to repay with heavy interest. They were never created to support African countries with financial aid. Yes they help Africa countries with some amount of money in some disasters time but the money they spend on those projects are not up to one quarter of the loan one Africa country pay back to them.

[darkangel11]

Borrowing money from world bank is averagely done when the country wants to maybe take on a large project which requires more money than they have. Imagine you have $50 but you want to do something and need extra $50, then you have to borrow the money from your friend. People who doesn’t know much about you and your friend’s agreement would think that you borrow $50 which they know you can afford, whereas you added it to what you have so you can solve your problem. It can also be because the country doesn’t want to run into financial issues so they would rather use borrowed money than the one they have.

You're on the right track. Usually investors see borrowing as a way to increase productivity because that's what matters' If you can artificially increase indicators, other countries and companies will use those indicators when deciding if they should branch out to that country and this creates real jobs and real revenue for the country. In other words countries don't promote themselves like companies do. They promote themselves through economic indicators and the more money they have the more they can boost those indicators. This means that by borrowing money they're borrowing to advertise in order to attract more wealth. The leaders also do it to show themselves as more capable. Voters want healthcare, strong army, jobs, modern infrastructure and the more their leaders can achieve the greater their chances for reelection.

[_BlackStar]

A country borrows from the World Bank only when they do not have enough money in their reserves.  If it happens that a country needs 100$ to implement a big project but soccer has 100$ in reserve, then it has to take a loan from the World Bank. Because if the reserve is empty, it can't be done anymore. Because a country has various tasks and  Finance is needed in various sectors.

Even if a country has enough money to fund its long-term projects - but a greater need for money could allow the government to improve more things. I've said before why governments need loans even if they have the money - but in most cases, governments do so out of urgent need due to insufficient money to fund their long-term projects.

Financing education projects, health and infrastructure projects requires a lot of budget - the government can't just expect its domestic revenues to cover it all without any problems, that's very difficult unless the country is really rich.

[oktana]

Borrowing money from world bank is averagely done when the country wants to maybe take on a large project which requires more money than they have. Imagine you have $50 but you want to do something and need extra $50, then you have to borrow the money from your friend. People who doesn’t know much about you and your friend’s agreement would think that you borrow $50 which they know you can afford, whereas you added it to what you have so you can solve your problem. It can also be because the country doesn’t want to run into financial issues so they would rather use borrowed money than the one they have.

You're on the right track. Usually investors see borrowing as a way to increase productivity because that's what matters' If you can artificially increase indicators, other countries and companies will use those indicators when deciding if they should branch out to that country and this creates real jobs and real revenue for the country. In other words countries don't promote themselves like companies do. They promote themselves through economic indicators and the more money they have the more they can boost those indicators. This means that by borrowing money they're borrowing to advertise in order to attract more wealth. The leaders also do it to show themselves as more capable. Voters want healthcare, strong army, jobs, modern infrastructure and the more their leaders can achieve the greater their chances for reelection.

But what’s crazy is how the world bank simply gives the money to these countries? Or maybe it isn’t as simple as I assume it is. But they give money and I don’t think it has any deadline, collateral or anything as normal loans have. It just seems that the only thing that happens is that the country will be forever indebted until they pay. Many questions arise: how do they make the money they are giving? Etc.

[freedomgo]

Every country has to achieved its target goals and developments that the citizens are expecting from the country’s government. For that, the need to borrow money from the world bank may suddenly arise so they can provide the people’s needs to live a healthy and stress free life, so they can experience the benefits that the country is obliged to give to their citizens. However, there might be different issues regarding where the money is being put to, but rest assured the goal of each country’s government is to satisfy the longings of their citizens.

[jrrsparkles]

It's ok for a country to borrow so far they're using it for infrastructural purposes, from my understanding it's not necessary that a country should use the money in their reserve to execute any meaningful projects, because it's good to always have money in reserves, in the case of emergencies. But problems arises when a government will borrow money from world bank for a project, in the end the money will be embezzled by government officials, instead of using it for the purpose that it was borrowed. So the problem is not to have sufficient reserve and borrow for projects, a government can decide not to touch it's money and borrow, problem is corruption, they'll embezzle money borrowed and leave the responsibility of paying back to the next regime.

The debt of countries keep adding up due to interest rate even though it is low compared than borrowing money from private entities. Still how effective they make use of the loan money that can generate revenue to the government so they can pay back the loan but governments keep borrowing and let the next government to carry forward and this cycle keeps on going all the time.

[EluguHcman]

I am not sure about countries but I know that many persons and businesses prefer to use borrowed money because loans are cheap and many prefer loans to spending/investing their own money.

As economy demands, please what could cause an individual to have his/her sufficient funds untouched but craving to use the loaned funds to execute their personal interests projects?
It is thoughtful because it is believed that the loaned funds is usually comed with interests which probably if you have your own money spent it saves you from paying additional interest rates for loaning.

[martinex]

The answer is to diversify sources of funds even if a country is deemed capable, apart from that, its governance will be an example that can be adopted by borrowing countries in the reporting system.

Yes. We know that there are many conditions that must be met in order for an application to be accepted, but the worst is ongoing interest and debt payments. However, if the government has properly evaluated which program will be implemented and will have a good sustainable impact on society, I think it would be better to propose and implement it.