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Explain the Aid - related Problems Faced by Least Developed Countries:

      

Explain the Aid - related Problems Faced by Least Developed Countries:

  

Answers

Felix
i)The volume of Economic Aid.

Analysts say that 'donors are fatigued'. Following the foreign aid boom of the 1960s which were dubbed as 'the development decade'. The aid boom hit an anti-climax at the start of the 1980s decade as a number of recipients owned up their inability to service debts. The increased protectionism in developed countries against imports and the decline (in real terms) in the demand for some developing countries exports, with die high cost of debt servicing and-high import prices, combined to cause what is now called the 'world debt crisis'.

ii)Loan renegotiation and Rescheduling:

As a standard prescription dose, the IMF demands that there be severe cutbacks in government spending, money supply, and wages. Generally the IMF and the World Bank subscribes to the neoclassical view that the private sector is an efficient use of resources and therefore the economy ought to be left to die free play of market forces. Government divestiture from parastatals and the elimination of price controls, subsidies and import restrictions are some of the measures included in a standard IMF programme.
Critics however, argue that experience shows that such programmes can only be implemented at high political costs and loss of human life. They often plunge an economy deeper into depression, inflation and unemployment. In Zambia, they triggered riots which led to losses in human life. On the other hand the IMF / World Bank argues that the programmes hurt the poor in the short term, but tend to enhance productivity in the long run.

iii)Choice on the use of Foreign Aid Funds:

In international lending, distinction can be made between project aid and general purpose aid. Developing nations prefer the latter because it gives them freedom to decide on how to use the aid money. But owing to fears about die possibility of misuse of funds, donors prefer to give project aid because the implementation of projects can be closely monitored by their own personnel. But this again creates misgivings on the part of die recipients of foreign aid.

iv)Conditions Tied to Foreign Aid:

Conditions normally tied to aid are: Economic reforms. Political reforms. Human rights records.
Anganifelix answered the question on June 14, 2018 at 16:33

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