Debt and Deforestation: A Review of Causes and Empirical Evidence

The debt crisis of developing countries led to the widespread adoption of Structural Adjustment Programs (SAPs) during the 1980s. This article examines the hypothesis that heavy foreign debt causes a high rate of tropical deforestation mainly through the clearing of forestland for agricultural expansion. The article also reviews the possible causal links between debt, agricultural expansion and deforestation. Empirical evidence from tropical developing countries indicates that debt and deforestation are positively linked. The article concludes by suggesting that reducing the debt burden of developing countries can widen the opportunities for better environmental policies.