International debt and International aid Flashcards
what is a national deficit?
When a government’s annual spending exceeds the income that it generates through taxes
what is a national debt?
the accumulation of yearly deficits
What type of country is debt the biggest problem for and why?
LICs because a higher proportion of their income is spent on interest payments limiting the amount of money available to spend on infrastructure
what is the debt service ratio?
the proportion of a countries export earnings needed to meet its debt repayments
Give some reasons why the poorest countries in Africa got a debt crisis?
- During the 1970s interest rates were low making it easy for developing countries to borrow
- Drought in 1981-84 severely affected Africa’s cash crop production
- Protectionism in the worls markets for agricultural products make it difficult for African countries to increase exports and get out of debt
What are the reasons for defecits in Greece?
- Excessive spending on military, pensions and other social benefits
- Low GDP growth rates and poor competitiveness
- Large debts which were not reduced during the years of economic growth
What was done about the Greece debt crisis?
On the 10th May 2010 the eurozone countries agreed on a 110 billion bailout loan only if:
- they implemented austerity measures to restore the fiscal balance
- Privatized government assets worth 50 billion euro by the end of 2015
- Implemented reforms to improve competitiveness and growth prospects
Why should HICs give LICs aid?
- To make up for past mistakes eg. Colonisism
- Political instability in LICs can threaten the HICs raw materials and markets
- Aid helps trade, with a better economy an LIC can afford more imports from HICs
What is relief aid?
Aid that is given to people in distress or immediate threat of death eg.natural disasters
what is an example of an organisation which specializes in relief aid?
Red Cross provides assistance and protection of civilians and prisoners of war
What is development aid?
Given to HICs to support economic development or social development in LICs
- Aimed to alleviate poverty in the long term rather than on an immediate crisis
what is development aid spent on?
- projects for a specific purpose such as building materials for a hospital
- debt relief
- International research, for example into new crop varieties or vaccines
what is tied aid?
Aid that is given to a country in need but the donor country gets something in return e.g a country gives money to another country but they have to spend it in the donor country
What are the two reasons for tied aid?
Economic: Donor country wants to increase its exports
Political: The country may have historical/colonial links and may want to strengthen its geopolitical interests
What is Bilateral aid?
When aid is between two countries eg Uk and Mozambique
What is Multilateral aid?
Aid involving more than two countries e.g France, UK, Germany give money to the UN which passes it on to an LIC
What are some of the issues for countries receiving aid
- Aid doesn’t always reach those who most need it eg. corruption
- Some countries lack basic infrastructure and this makes it difficult to use aid effectively
- Aid reliance which means farmers which are not affected cant sell food
- Tied aid often comes with strings attached
- Large number of organisations involved in aid leads to overlap and ineffiency
How has Swaziland become over reliant on aid?
- Between 2000 and 2010, upto 2/3rds of the 1.2mill population relied on donor food assistance
- In 2012 it had a life expectancy of 48
- food aid led to some farmers believing that they would always be supplied with food and became dependent on it
- Aid doesn’t benefit the economy because people are not buying things
- Recipients of clothing will not buy clothing from local producers putting them out of business meaning they also need to rely on aid
