In a bid to steer development and establish financial stability in the less developed countries, the developed nations through international financial institutions such as the World Bank and International Monetary Fund have always offered aid in terms of loans and grants to these nations. However, much of the aid is given in terms of long-term loans. Long-term debts to poor nations by international financial institutions meant to finance development projects are a constraint to capital formation and poverty reduction in these countries. Most of the less developed countries are highly indebted and not able to repay the loans. Most of these countries face excessive debts and the level of the debt is greatly more than their Gross Domestic Product (GDP). External Debt in these countries constitutes private, Bilateral, and Multilateral debts. These debts are a great hindrance to the attainment of their development goals as well as human development (Cheryl 1991, 84). Long-term debts have slowed down the efforts and process of instituting sustainable development as well as political, social, and economical stability in these countries. These loans do not assist in financing developments. Most of the poorest nations have unsustainable debt. Most of their population lives below the poverty line and therefore they ought to use their resources in ways meant to reduce poverty and not on servicing of debt. The debt keeps on increasing to cover repayment of capital as well as interest. This debt in effect is a self-perpetuating mechanism of increasing poverty and blocking development in these countries. Most of the poorest nations have a Gross Domestic Product (GDP) below $ 785. By 1998, long-term debts in terms of private, bilateral, and multilateral by developing countries stood at $155.3 billion as shown in the diagram below. Long Term Debt of Developing Countries 1998. Source: World Bank, Global development Finance 1999, Analysis and Summary Tables Poor nations are forced to divert much of their national resources to debt servicing. Much of this goes to servicing the interest other than the principle. These countries often use between 20 and 25% of their Gross National Income on paying interest alone. Statistics show that in 1996, Africa was forced to pay $2.5 billion in servicing of its debts more than what it received in form of long-term loans. These loans are usually advanced to these countries with strings attached. Before the heavily indebted poor countries are advanced these loans, they must fulfill certain conditions set by the financiers. This is usually done through Structural Adjustment Programs (SAPs). These programs are designed to change these economies from subsistence production to international market-oriented type of production (Sachs 2000, 17). The Structural Adjustment Program loans are usually meant to help these countries change their political, commercial, and industrial systems. This in effect is not meant to develop these nations but to enable them to be able to continue servicing their debts. These programs in effect have resulted in more harm than good to the economies of third world countries. They have resulted in widespread unemployment, rampant poverty, and wanton destruction of the environment. To solv