Foreign aid - Who is the real beneficiary - donor or the recipient?
Foreign aid - Who is the real beneficiary - donor or the recipient?
Lending financial aid to poor countries has become a trend of rich countries since the second half of the 20th century. In my opinion, it doesn’t matter whether rich countries should lend poor ones financial aid or not but the way poor countries utilize this capital source because financial aid has both pros and cons.
For the first reason, financial aid is a helpful source to poor countries. It provides huge capital for these nations to develop infrastructure, improve education as well as health care systems and carry out big projects which can not be conducted without a large amount of money. Moreover, because this aid is lent at low interest rates in a limited time, receivers will gain advantages if using this source reasonably.
However, to some extend, poor countries often depend on rich countries who lend them money. For example, these nations often have to make some agreements with creditors in using the financial source.
Sometimes rich countries even make their voice on political problems of poor countries. Borrowing large amount of money, in turn, they often have to make some economic commitments and give lenders priorities in auctioned projects in their countries. In additions, financial aid may put poor countries at risk.
For example, when they borrow too much money but can not control this source effectively, they may go insolvent. And this will become a burden for the later generations. The debt crisis recently in Greece is a warning to any country that has borrowed too much and cannot use the loans cleverly.
Therefore, the way a poor nation use financial aid takes an utterly important role in deciding the effectiveness of this support. Simplifying administrative procedures, preventing corruption, investing reasonably and many other controlling methods are requirements posed for the governments so that they can keep them relatively independent of rich countries and well utilize the loans.
In conclusion, lending financial aid is neither totally good nor bad but it has to be justifiable.
Discussion
- RE: Foreign aid - Who is the real beneficiary - donor or the recipient? -Deepa Kaushik (04/14/14)
- Getting aid from the richer nations of the world is no good to the economy of the receiving end. No country provides any aid without any terms; practically, it should be termed as loan that is borrowed at time of need. Since the loan is used only for the money, and the donor country provides with all sorts of help in case of need, so is the term “aid” used here.
For any country to receive the aid, they need to sign up certain terms and condition, failing which they get heavily penalised, could be in terms of money, or authority, or a political stand. In every way the receiving country is always at loss.
For the donor, they either get back their lend product along with the interest charged as per the conditions, or they take hold of the thing on stake. Either ways the donor is t benefit. May be this is a way out get more richer to those who are already rich, and making the poor country even more poor, shattering their economy and development. If the receiving end fails to built in sufficient infrastructure with the borrowed amount, then they definitely lose themselves to the hands of rich donors.
- Foreign aid - Who is the real beneficiary - donor or the recipient? -Janhvi Johorey (04/04/14)
Foreign aid - Who is the real beneficiary - donor or the recipient?
Introduction
Foreign aid has a vast amount of benefits for those who are giving them. But the recipient nations are the real beneficiaries of foreign aid. A country has economic and political reasons for seeking foreign aid. Such aid can benefit the country to a major degree. Foreign aid can change the state of the economy in such countries. It can initiate infrastructure development and social welfare reforms. Foreign aid has great value for recipient countries.
Viewpoint
Recipient countries need foreign aid to improve the investment climate and encourage the growth of entrepreneurship. It is also helpful for providing support in improving trade and growth in key sectors such as manufacturing and services. Recipient countries also benefit from foreign aid because it enables them to pay interest on the debts incurred. Timely foreign aid can also help these nations to improve the state of their infrastructure. Infrastructural changes can be made to ensure that the nation gets enough good quality roads and world class airports and railway stations. The biggest advantage of foreign aid to recipient nations is that it initiates favourable economic growth. It is the catalyst for positive change.
Another reason a recipient country is the real beneficiary of foreign aid is when there are emergencies and natural disasters. In the event of cataclysms, financial aid can prove very beneficial in restoring destroyed infrastructure and ensuring that the healthcare needs of the population are also met. Recipient nations should also take aid in the form of grants for making improvements in key fields. It is definitely true that adequate foreign aid can transform a nation into a superpower, if the capital is used wisely.
Another important aspect of foreign aid to recipient countries is that it tends to ensure that resources of the country are not being wasted in any way. Foreign aid is well accounted for and donor countries often give financial capital for the completion of key infrastructure projects. It is vital that money should not be wasted on ineffective projects or corrupt practices. Scams and scandals are averted if foreign aid is obtained for growth and development.
Recipient countries are perfectly within their rights to utilize foreign aid in a transparent manner for the growth and development of their economy. They are also able to initiate key social reforms. Structural adjustment programs are also facilitated by the use of foreign capital. Foreign aid is vastly beneficial to recipient nations if it is properly utilized.
Foreign aid is crucial for national security needs as well. Effective security of the nation is facilitated through cash aid for military programs. This can have vast benefits for those who want to protect their nation’s welfare. Foreign aid is also beneficial for enhancing scientific and technological advancement in the country as well.
Conclusion
Foreign aid is extremely beneficial for improving productive capacity and initiating key development of priority sectors. Adequate foreign aid enables the recipient country to reduce and eliminate poverty, unemployment and inequity. It is beneficial for improving the status of the nation as well. Timely foreign aid is a very important precursor of growth and development. To a very large extent, foreign aid also improves bilateral trade relations and diplomatic ties between the donor and recipient countries.
