Aid

Aid

1. Types of Aid

   • Multilateral Aid
     • occurs when countries pay money to an international agency which then distributes it to countries on the basis of certain criterias
   • Tied Aid
     • This is aid w/ conditions attached(ex. there might be requirements to buy goods from the donor country or the aid might be given on condition that there are some economic and political reforms
   • Bilateral Aid
     • aid given directly by 1 country to another

2. Arguments For

   • Providing funds for infrastructure - essential if the country is to industrialize. Aid therefore will help to increase AD and investment will have a multiplier effect on GDP. In turn, this will help to promote sectorial development
   • The reduction of world inequality
   • Reduction in absolute poverty
   • Aid might contribute to increased globalization and trade, both of which are frequently associated w/ growth & development
   • Improving human capital through promotion of healthcare, education, training and expertise In some countries, aid might be used to help the prevention and treatment of AIDS Ex: the training of teacher and doctors
   • Filling the Savings Gap experienced by many developing countries (Harrod-Domar Model)