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

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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