Effects/impact of Foreign Aid on the development of the country.

Positive impact/Benefits of foreign aid

• Closing the saving – investment gap
• Closing the foreign exchange gap/inflow of foreign exchange.
• Closing the  technologic al  gap /  leads to technological transfer
• Fills the government-revenue expenditure gap / source of government revenue through borrowing, grant etc.
• Fills the  (skilled) manpower gap I enables the country to get skilled labour (from other countries)
•  Facilitates development of infrastructure.
• Alleviates effect of catastrophes.
• Provision of employment.
• Strengthens international friendship / improves international relations .
• Foreign aid in form of capital investment accelerates industrial growth in the country / diversifies the economy.
• improves local skills through training.
• Promotes economic growth.
• Exploitation of idle resources hence avoidance  of resources wastage:
• Promotes political stability.

Negative impact(s) of foreign aid in the country

• BOP problems due to repayment obligations.
• Unemployment due to automation
• Undermines capital formation due to debt servicing and payment.
• Debt servicing sometimes denies nationals essential goods and services.
• Encourages laziness/kills local initiatives.
• Makes planning   difficulty due   to aid being inconsistent, inadequate, tied, etc.
• Political strings attached to aid undermine our political sovereignty.
• Underutilization of local resources reduced domestic production of some goods / hinders growth of some consumer goods.
• High costs of borrowing due to aid being tied to source / Purchase tied aid.
• Leads to brain drain.
• Leads to cultural erosion / corrodes social values.
• Worsens economic domination by donors
• Sometimes preset conditions are disastrous.

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Thanks

Dr. Bbosa Science