Unit 2.3 Debt & Aid

Question 1

Give 3 examples of what is meant by infrastructure

Answer 1

1. Roads, railways, ports and airports
2. Distribution of energy and water supplies
3. Sanitation and waste disposal
4. Schools and hospitals
5. Telecoms and the internet.

Question 2

What is a bilateral loan?

Answer 2

A two-sided loan lent by one government to another.

Question 3

What is a multi-lateral loan?

Answer 3

A many-sided loan such as money lent by international groups e.g IMF, World Bank, African Development Bank

Question 4

Give 3 reasons why unsustainable debt may build up

Answer 4

1. Large loans were offered and taken out at low interest rates.
2. Large loans were offered by foreign governments in return for the right to exploit minerals.
3. Rise in interest rates.
4. Low prices for agricultural exports.
5. Rise in oil prices.
6. New loans taken out to pay interest on old ones.
7. Corrupt rulers borrowed large sums for personal gain.
8. Global financial crisis.

Question 5

What is meant by unsustainable debt?

Answer 5

The debt (money owed) is so large that the country has no hope of ever paying it off.

Question 6

List 4 methods countries can use to reduce debt.

Answer 6

1. Reduce imports
2. Produce manufactured goods for domestic market.
3. Increase exports
4. Reduce spending on healthcare, education etc (austerity)
5. Increase production of cash crops
6. Devalue the currency
7. Change loan conditions to pay back over a longer period.
8. Take on another loan to pay back the original one.

Question 7

What does HIPC stand for?

Answer 7

Heavily Indebted Poor Countries

Question 8

What does PRS stand for?

Answer 8

Poverty Reduction Strategy

Question 9

List three objectives of a poverty reduction strategy

Answer 9

1. Introducing free primary eduction in public schools
2. Providing vaccination to more that 90 % of children.
3. Raising awareness of HIV / AIDS

Question 10

Give an example of the benefits of debt relief in each of the following areas:

1. Political
2. Environmental
3. Social
4. Economic
5. Humanitarian

Answer 10

1. Government can concentrate on improving people’s quality of life.
2. Developing Countries will have less need to offer their natural resources to be exploited in return for loans.
3. More money is available for schools and clinics.
4. Infrastructure such as roads can be constructed to encourage economic growth.
5. Poverty is reduced.

Question 11

What was the Jubilee Debt Campaign in the year 2000?

Answer 11

A campaign to cancel developing countries’ debt that was considered to be unjust and trapping people in poverty.

Question 12

Why was the debt considered unjust?

Answer 12

It was given irresponsibly with no thought how a country could pay it back.
It was given for expensive projects that were of little use.
It was given to corrupt dictators.

Question 13

What is the G8 and which countries does it include?

Answer 13

The world's most powerful countries:
USA
UK
Japan
Germany
France
Canada
Italy
Russia

Question 14

What is meant by “technical aid”?

Answer 14

Expertise and skills such as those used by engineers, doctors etc and equipment such s mechanical diggers and hospital scanners.

Question 15

Why do developing countries need aid?

Answer 15

1. To undertake measures to improve the living standards of people.
2. To provide infrastructure to encourage industries whose exports will help pay off debt and stimulate the economy.

Question 16

Suggest a way in which money given to aid agencies may be lost.

Answer 16

Stolen by corrupt leaders

Swallowed up in admin costs (employing office staff etc)

Question 17

Define “capacity”

Answer 17

The ability or scope to do something.

Question 18

Name three reasons aid is given.

Answer 18

1. Humanitarian - tackling natural disasters or emergencies.
2. Political - Countries may feel a particular obligation to others e.g. former colonies.
3. Economic - to improve trade relations with other countries.

Question 19

What is meant by “tied aid”

Answer 19

Aid that comes with conditions attached.

Question 20

List the 3 main donors of aid.

Answer 20

1. Foreign governments.
2. International agencies e.g UNICEF, WHO (World Health Organisation), WFP (world food programme).
3. Charities e.g The Red Cross, Oxfam, Tearfund.

Question 21

What does the term grass-roots charity mean?

Answer 21

One that is very local working in an immediate area. The opposite of large international charities.

Question 22

List 4 problems with aid

Answer 22

1. Funds can be used for the wrong purposes by corrupt officials.
2. Funds may be spent on large projects that only benefit a few people.
3. Large projects may cause social and environmental; problems.
4. People may become lazy and rely on hand-outs.
5. Governments depend on foreign countries to provide infrastructure instead of using public funds.
6. Projects may include inappropriate technology which cannot be maintained.
7. Aid may be used to purchase weapons.