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Roles of foreign aid & developmental assistance (Evaluation of foreign…
Roles of foreign aid & developmental assistance
Humanitarian aid
Usually short-term grants during a humanitarian crisis which does not have to be paid back
Medical aid
Emergency aid
Food aid
Developmental aid (ODA)
Long-term assistance to alleviate poverty and improve welfare, often on concessionary terms
Grants: non-repayable funds disbursed by one party (World Bank)
Long-term loans: repayable over a period of time, concessional (lower Ir)
Tied aid (condition that funds buy G&S from donor)
Project aid: grants for a project (World Bank)
Technical assistance aid: may include training/bringing in capital/scholarships for locals
Commodity aid: grant to increase productivity
Evaluation of foreign aid
Most of aid goes to urban-dwellers, not those who need it
Could be driven by political reasons
Poorest countries are the least attractive
Tied aid: no choice to select cheaper alternative
Loss of interest in innovation and development
Food aid: may cause prices of domestic produce to drop
More beneficial if developed countries lower trade barriers
More aid given to modern industrial sector than primary
Multilateral Development Assistance
The IMF
Surveillance
To adjust structural programmes
Technical assistance
Training, organisation management
Financial assistance
Grants/loans
Assistance to correct BOP
Criticisms
Voting power is based on contributions: not democratic, largely controlled by rich countries
Moral hazard: loans bail countries out of crisis
Lending works poorly
Stabilisation policies are anti-developmental: imposes austerity, destroys domestic markets (trade)
Promotes
economic stability
World Bank
Promotes
economic development
, providing aid and advice, reducing poverty and encouraging international investment
NGO
Conduct and publish studies that bring light to issues
Strong pressure groups towards government policies and MNC activities
Involved in developmental projects
May provide emergency relief
Have a much greater understanding of problems