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Foreign Aid and Multilateral Development Aid - Coggle Diagram
Foreign Aid and Multilateral Development Aid
Types of aid and conditions tied to some aids
Humanitarian aid
usually a
short-term
,
temporary
assistance
extended to regions affected by
violent conflicts
or
natural disasters
goal:
save lives
ensure access to basic necessities
provide assistance with reconstruction
Development aid/assistance
usually long-term in nature
goal:
economic development of the recipient country
From?
Bilateral aid: from other countries
Multilateral aid: from international organisations such as the UN, World Bank, IMF
Types
Programme aid
financial support to
sectors
such as education, health care, agriculture, urban development, the financial sector, the environment
RWE: Singapore sending shipments of medical supplies to Indonesia in 2021 as COVID-19 cases surge
Project aid
financial support for
specific projects
, such as building schools, clinics, hospitals, irrigation systems, other agricultural infrastructure or others
Technical assistance
focused on
raising the level of technology in the ELDCs
by bringing in foreign technology and technicians to instruct them in the use of this and/or to raise the quality of human capital giving training and expert guidance to the locals or even giving them scholarships to study overseas.
Debt relief
countries with high levels of foreign debt receiving
debt forgiveness
Grants
funds
disbursed by one party that need not be repaid
Concessional loans
usually
repayable
over a period of 10 to 20 years and usually
concessional
(lower rates of interest)
Tied aid
the practice where donor countries make the recipients of aid spend a portion of borrowed funds to buy goods and services from the donor country. ONLY occurs in the context of bilateral aid, NOT multilateral aid
The problem of tied aid
Recipient countries:
are forced to buy goods and services from donor countries at a higher price
may buy inappropriate, capital-intensive technologies from donor countries
Eventually, donor countries benefit at the expense of recipient countries I.e. recipient countries lack economic sovereignty
Who offers foreign aid?
Official Development Assistance (ODA)
comes from government funds
forms the largest part of foreign aid
Non-governmental organisations (NGOs)
examples of NGOs
Doctors without Borders
OXFAM
Save the Children
CARE international
World Vision
World Wildlife Fund
not part of a government & was not founded by states --> independent of governments
they are social, cultural, legal, and environmental advocacy groups whose goals are primarily non-commercial
typically small and usually non-profit organisations that gain at least a portion of their funding from private sources & from bilateral and multilateral ODA funds
Haiti RWE: Their economic development
Issue: 2010, Haiti was hit by one of the worst earthquakes in history. 200,000 people died, 1.5 million became displaced.
UN Development program (UNDP)(multilateral aid): the UNDP empowered local councils to prioritise issues and get access to issues. They supported projects to reconstruct and improve roads, alleyways, drainage systems, public spaces and build disaster-resistant homes, all using recycled material.
positive implications.
creates jobs for the residents
allows their economy to grow
funding the plans of the residents is effective, because they know what needs to be done to rebuild.
Issue: 2021, political unrest. Rising murders and Kidnappings from gangs (said to be associated with the government). Citizens are protesting against the re-election of the president (Jovenel Moïse) and government.
Consequence: the economy contracted for five consecutive years by 1.7% in 2019, 3.3% in 2020, 1.8% in 2021, 1.7% in 2022, and 1.9 percent in 2023
Current economic situation: GGDP per capita of US$1694.1 and a GINI index of 41.1. HDI value for 2022 is 0.552— which put the country in the Medium human development category—positioning it at 158 out of 193 countries and territories on this United Nations metrics, published in March 2024
Multilateral Development Aid (given by the World Bank and the IMF)
involves lending to ELDCs by international organisations such as the World Bank on non-concessional terms
concessional terms: loans are charged with interest rates and repayment periods determined in the market
this is different from foreign aid (which is on concessional terms)
Roles of the World Bank and the IMF
International Monetary Fund (IMF)
monitors global financial system
follow the macro policies of its member countries
promotes stability in exchange rates
extends short-term commercial loans to countries that experience difficulties in making international payments
differences between the World Bank and IMF
IMF is funded by quotas paid by member countries ('subscriptions') whereas the World Bank is funded by issuing bonds to global investors
IMF's biggest borrowers are countries like Greece, Portugal, Ukraine, Pakistan whereas the World Bank runs the most projects in Asia and Africa
issues concerning the role of the World Bank and the IMF
social/environmental concerns
governance is determined by major contributors
excessive interference in countries' domestic affairs
conditional assistance
negative impact on macroeconomic goals
inadequate attention to poverty alleviation
The World Bank
does this by extending long-term loans to less economically developed countries
promotes economic development & structural change