Foreign Aid

Question 1

Define foreign aid

Answer 1

International transfer of capital, goods or services from a country or international organisation for the benefit of the recipient country or its population

Question 2

What types of aid are there

Answer 2

Grants —-> sum of money given for a development project
Soft loans —> on concessional terms at low interest rates/longer repayment periods
Technical assistance —> expertise for a development project or free education for foreign students in the donor country
Food aid —> sending food and other goods such as medical supplies

Question 3

What are the advantages of foreign aid

Answer 3

Plugs the savings gap
Increases living standards —> reduced poverty
Sustainable development —> rich should support the LEDCs as MEDCs are major polluters of the planet and should be responsible for ensuring growth is sustainable

Question 4

What are the disadvantages of aid

Answer 4

Corrupted regimes take aid flows for themselves
Food aid increases the supply of food on the local market depressing food prices which discourages local production and lower living standards for farmers —> increases dependence on imported food —> uses up foreign exchange better used for capital goods
Increases debt caused by interest payments on loans