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The Role of Foreign aid (Foreign Aid (Limitations (Tied aid (Forces…

- - - - Bilateral aid
      - Multilateral aid
  - - - aims: economic development in the long run
      - Debt relief
      - Project aid
      - Programme aid
  - - - Low consumer spending
        
        Low tax revenue
        
        Governments have insufficient funds to invest in capital
        
        Foreign aid provides government with funds to finance necessary investments
        
        Break out of poverty cycle
    - - Increase in
        economic growth
      - Higher tax revenues
        
        Government able to independently finance investments in capital
  - - - Forces recipient countries to buy capital intensive technologies
        
        Structural unemployment
    - - Government may use aid funds instead of domestic revenues
        
        Not enough effort to increase tax revenues
- - - - Condition of depriciating
      - Contractionary monetary policy -->
        reduce spending and raise taxes