Advantages And Disadvantages Of Development Aid

Development Aid

• Development aid is also known as development assistance or international aid or foreign aid.

• Development aid can be defined as assistance that rich countries or developed countries give to developing countries so as to boost their industries and economic activities.

• Developing countries are often given aid in order to reduce poverty thus improving living standards and economic welfare of people.

• There are different types of development aid from developed countries to developing countries.

Types of development aid

• Food Aid o When a country produces more than what it needs or when there is overproduction of foodstuffs like wheat, maize or meat; the country may give the excess to developing countries. o The costs

• Aid can also help farmers to increase their production if it is in form of machinery for agriculture.

• Projects that are supported by development aid helps in creating more jobs thus the living standards are likely to be improved as people get their incomes.

• Infrastructure of a country can also be improved by development aid from developed countries.

Disadvantages of development aid

• Leaders may end up paying much attention to donors than to citizens thus aid may hinder true democracy.

• Developing countries may end up having a dependency syndrome or dependency culture.

• Food aid may distort market forces and loss of economic efficiency.

• There is likely to be a risk of corruption and the aids may not reach their rightful recipients.

• Countries giving aid may end up influencing economic and political factors in developing countries.

• Foreign aids may only benefit large scale farmers than small scale farmers.

Debt crisis

• Debt crisis is a situation whereby a country fails to repay its

• Oil prices in mid 70s shot up and since most of them were importers of oil they faced higher costs of imports and that rise in oil caused the world’s economy to slow down.

• When the world’s economy slowed down, economic growth in those Latin American countries slowed down as well and their currencies depreciated hence they struggled to repay the debt.

• In the 80s interest rates in the West increased and a combination of increased oil price, depreciation of currency and increased interest rates meant that National Income became insufficient to meet interest repayments.

• In response to the crisis, the International Monetary Fund (IMF) lent money to those countries but the conditions were; the countries were to privatize and remove all tariff constraints .

Example: Sub Saharan Africa

• The crisis was similar to Latin America debt crisis.

• Sub Saharan Africa borrowed excessively to finance investments but the funds were misused because of political corruption, lack of infrastructure and inefficient allocation of resources.

• The debt burden increased but, the capacity to repay did not increase thus countries to pay back their