1. F OREIGN A ID

2. February 26, 2015 4 Objectives: To develop a better understanding of Foreign Aid 4 Questions: What constitutes Foreign Aid? Where are the greatest needs?

3. Foreign Aid ("Aid") can be defined as: 4 “an administered transfer of resources from a donor country or international agency to an LDC to encourage economic growth"

4. Types of Foreign Aid 4 Grants : (The issue of aid with no repayment necessary.) 4 Loans: on concessional terms (Aid issued on terms that are lower than market interest rates.) 4 Technical Assistance: (Equipment, machinery, 4 technology) 4 Commodity aid: (mainly food aid)

5. Who gives aid? 4 Private: unofficial individual(s) aid 4 Public : Official Aid Aid given by governments (U.S./Canada) and international institutions (Red Cross).

6. Official Aid Official aid is divided between 4 Bi-lateral aid From one country to another 4 Multilateral aid From a group of countries, usually administered through an international institution (WB, IMF, UN), to an individual country

7. The forms of Aid 4 Tied Aid Aid offered with conditions attached, usually to push through economic reforms or undertake a project that will benefit the donor party. 4 Untied Aid Aid offered with no conditions attached.

8. Aid will work if 4 Aid is used to increase productive capacity and the benefits of resultant growth is widely spread and results in a reduction and elimination of poverty, inequality and unemployment 4 Aid represents an injection of resources into the economy that enable investment hence growth 4 Aid can help the transmission of new ideas

9. Aid will not work if… 4 Aid is spent on current consumption 4 Aid is spent on inappropriate capital as opposed to appropriate technology making intensive use of labour 4 Aid is spent on ‘showcase’ infrastructure projects that damage the environment and have little impact in raising living standards eg dams 4 Aid can lead to dependency rather than self-reliance and self-sufficiency.

10. Aid will not work if… 4 Aid is in the form of free/cheap food in non-crisis situation as the increase in supply reduces agriculture prices for local farmers disrupting markets 4 Corrupt governments can intercept much assistance; 4 AID IS UNSUSTAINABLE. WHAT HAPPENS WHEN IT STOPS?

13. Does aid contribute to economic development?! 4 The effectiveness of aid depends on various factors, as outlined above. To be effective aid: 1. needs to be channelled into areas which require capital investment, 2. that will contribute to an increase in development; 3. that can become self-sustaining in the future. Experience has shown that aid forwarded into small scale projects at grass roots level generates the greatest success.