How can foreign aid harm developing countries
This article consists of 6 pages and 2000 words. developing countries In order to have full access to this article, email us at thedocumentco@hotmail.co.uk
Ref No: 3288
How can foreign aid harm developing countries?
After theWorld War II, the foreign aid has been a very prominent tool that is used by high-income countries to assist the low-income countries in increasing their economic growth. It is also helpful to facilitate industrial development and for the welfare of population (Deaton, 2014). The General Assembly of UN proposed a special resolution in 1970 which aimed at provision of 0.7% of GNP by developed countries towards the developing countries for their official development. Since 1960 to 2013, 3.5 trillion dollars were at least given to the poor countries as an aid. Foreign aid is mostly used as for education, health centers, roads, medicine, wells etc. (Kosack, 2002). But still the foreign aid for the development of poor countries is a controversy because a lot of funds have been given to the underdeveloped countries like Africa, but still, there is no improvement over there (Easterly,2006). Deaton in his recent book The Great Escape: highlighted that ” when the conditions for the development are available in the country than there is no need for foreign aid” (Deaton,2013).Further, the United States of America has been providing huge amounts of aid to the countries who have cooperated with its war against terrorism. The USA has spent Billions of dollars on accompanying its allies in the war namely Afghanistan, Pakistan and Iraq. For example Only Pakistan has received approximately USD 8 billion for compensation against cooperation and USD 3 billion for the purpose of development in Pakistan (Deaton, 2014).
There is no specific framework for the understanding of the impact of foreign aid. But the effects of aid depends on the type of aid and the outcomes of the interests. Where there are the positive effects of aid there are also negative effects of it on economic outcomes. Aid gives relief to the credit constraints faced by government and allows it to invest in the development of public infrastructure and human capital, which helps in increasing growth. While, on the other hand, foreign aid can have unintended consequences such as triggering the Dutch Disease, where the increase in the aid also increase the rate of stock exchange, which increases the prices of export and reduces the competitiveness of the manufacturing sectors (Gourinchas 2008).In addition, after the 9/11 attack, the United States began giving huge amounts of bilateral aid to countries cooperating in its fight on terrorism.There are different types of aid.
Bilateral Aid
Bilateral aid is given to the government directly by the government of the country. It is given when the capital flows a from a developed nation to a developing nation. This aid is often directed according to strategic political considerations as well as humanitarian ones. This aid is given to assist long term projects stability, to promote democracy, economic growth, and development.
Multilateral Aid
Multilateral aid refers to the provision of aid by more than one government which contribute funds to international organizations such as the IMF or World Bank or UN development program. This money is often used to induce government in the developing countries.
Tied Aid
Tied aid refers to the type of foreign aid where the aid is spent in the country of thedonor on in a selected country or group of countries. This loan is also provided to the developing country but with a commitment that it will be spent for the provision of goods and services to the selected country rather than the country receiving the aid.
Military Aid
The military aid which was $15 billion a few years back is such an aid usually given to buy arms or defense contracts directly from the USA or in other cases just simplifies the process by having the federal government just buy the arms itself and……………………………..continued
Recent Comments