Impact of Military Expenditures on Third World Debt

Abstract

The general purpose of this paper is to determine the main causes of Third World external public debt, and in particular the role military expenditures have played in contributing to that debt. For purposes of analysis, it was found useful to separate devewping countries into two groups. The first were classified as largely undynamic and resource &onstrained, while the second group were dynamic and less constrained by such factors as domestic savings and foreign exchange. Examining each group separately, it was found that military expenditures have significantly contributed to the external debt position of the constrained group of countries, but not those countries with relatively high foreign exchange earning capacity. Given that military expenditures are largely ''unproductive'', it appears that the resource constrained countries will face particularly severe problems in servicing their external liabilities.