Introduction: Pakistan is a developing country which is deficient in capital. Since its inception it has relied on foreign assistance to fill the financing gap which exists in different sectors. An efficient allocation of funds in each sector would have helped us overcome these difficulties and helped us raise the standard of living across the board. Due to mismanagement on the part of the government, there were wasteful expenditures. Now the country faces fiscal deficits due to corrupt government officials and poorly constructed policies. As a result of all this the country has amassed huge amount of foreign debt from donor countries (Hassan, 1998). Pakistan used to receive ad till 1977, after which assistance came in the form of loans and grants. Since productivity was very low in our country, saving were low which our debt servicing capacity i.e. our ability to pay back the the loaned amount. Mohey-uddin (2005) says that aid has made the country irresponsible when it comes to spending. Proponents of aid believe that it is because aid that the country has been able to maintain a high growth rate despite low savings (Qureshi 1968). On the other hand opponents believe that aid has no significant impact on either growth or development (Boone 1996). It is believed that aid is one of the tools through which developing countries can fill the financing gap and move towards capital accumulation but research shows that aid induces governments to direct more funds towards
Many skeptics challenge the reasoning for investing so much money into helping so many other countries when that money could instead help us improve internal affairs. After all, foreign aid spending has increased to $50 billion a year today, which could be put towards funding education to ensure that more kids go to college and possibly affecting the innovation of the future(Morris). Giving more than you receive is nice, but when it involves a country 's financial crisis, maybe it 's best if Santa cuts back some of this year 's presents. And although the argument may be valid, lending out a helping hand can create more allies than enemies to help us in return when we need it. In fact, foreign aid only accounts for 0.5 percent of the federal budget (Stearn). Compared to all the other matters at hand that the government is worrying about, the amount of spending put into aiding poorer countries is positive in both a moral aspect and a political aspect.
“Benefits of foreign aid have recently been under severe scrutiny. Several observers argue that a large portion of foreign aid flow from developed to developing countries is wasted and increases unproductive public consumption. Poor institutional development, corruption,
After giving it some thought, I believe that there is not a way that aid can be given without disturbing the local economies, institutions, and natural resources of receiving countries. I think the purpose of aid is to disturb the status quo and push for it to be better than it currently is. Some of the ways that aid can be given without making too large of a disturbance would be through microfinancing. Microfinancing is where a small loan ($25 - $100), which is repaid at a later date, is made available to individuals who are attempting to provide for themselves. Organizations such as Kiva provide microfinancing options for individuals to buy something as simple as a cow so that the products from the cow are then a source of income for that individual. Another way to provide aid is through agriculture development, where volunteers teach individuals farming techniques to receive a better yield.
It is widely held that the United States should give money to aid third world countries living in poverty because helping the less fortunate is a strong value in American culture. The U.S. has an interest in helping third world countries escape poverty and elevating them so they may contribute to the growing world-state. Therefore, America believes that sending a big fat check to the governments of these impoverished nations is the best way to help. However, all this gifted money does is create increased third world poverty by feeding corrupt governments and diminishing economic growth. This argument has been in the back of a lot of American’s mind for a while now, and people normally want one of three things. They want to decrease foreign aid, or they want to keep foreign aid the exact same, or they want to spend the same amount of money but distribute it different ways. The last viewpoint is what I want to focus on. Foreign aid needs to be changed into a more productive way for these developing countries to get out of poverty without corrupting their government or hurting their economic growth.
Africa has been the largest recipient of American financial aid for many years now and is thus up for examination as to whether this money is being used efficiently. Foreign aid is a humanitarian necessity in developing countries because it eliminates immediate suffering, helps to prevent this suffering in the long run through administration of medical, hygienic and educational essentials, and gives countries the capacity to have a stance in the international market through economic growth. There is clear evidence of why the USA and others should continue providing financial aid to developing regions in Africa.
There have been many studies taking place over foreign aid and sub-Saharan Africa since foreign aid initially began after World War 2. Many authors today have begun to ask the question, “Is Africa Different?” (Asiedu 2002). The Foreign Direct Investment(FDI) in the past decade has grown exponentially to 61 percent from the previous 24 percent in 1990. Africa, while seeing a significant increase in amount of investment, still has not seen anywhere near the level of investment that other
It is also through foreign aid that friendly ties are strengthened between two or more governments participating in it. With this, countries have been able to trade with each other where most African countries’ GDP has tremendously increased. For instance, William Gumede of New African magazine states that
Today, there is a tremendous amount of literature on the relationship between aid and growth (Hudson, 2004). McGilivray provides a recent comprehensive survey of the theoretical and empirical literature on foreign aid and growth. (McGillivray, 2006)
China needs us. Pakistan ought to grasp this immense open door with a down to earth, and systematic money saving advantage investigation as opposed to bewildering this exchange with illustrations of seas, mountains, nectar and now press. It's about hard money which the fund serve severely requirements for the nation. We ought not leave an excessive amount of money on the Chinese
If any form of foreign aid is taken for self development, for creating market based systems, for job creation and for coming out of poverty, it is worth taking the aid. Many third world countries prospered through foreign aid and are now considered as developing nations of the world. Some of them include Egypt, Israel, Taiwan, Malaysia, Korea and India (Alesina & Dollar, 2002). However, the political system in Africa is often headed by leaders who are corrupt. This has forced many African nations to endlessly depend on foreign
As the same time second part of this question will discuss reasons why the donor countries grant bilateral aid to poor and developing countries, rather than financial crises, reducing poverty, recovery procedures and economic stability which are common but some scholars like (Lumsdaine, 1993) believes that aid are given not only
Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs.
On the issue of aid, Pronk (2001) pointed out that aid can be seen as a catalyst rather than a primer mover, in the sense that aid is not a cause of development but a push or support to development. In the China-Africa relation, the role of aid has been to allow recipient countries to level their investment above domestic savings. Accordingly, Cheney and MacEwan (1966) assess that the function of aid is to enable the economy to expand through its ability to invest. In other words, aid serves as a catalyst. Griffin (1970) cautioned aid ability to act as a catalyst, contending that due to its negative effect, it retards economic growth instead of driving it. For Griffin (1970), aid is an impediment, not a catalyst. Furthermore, Boyce (2002) argued that, to describe aid as a catalyst for development, a sound analysis is essential to measure its negative and positive effect on the economy.
Afghanistan is a developing country; the country has faced troubles and difficulties soon after its independence. They have had problems in the development of constitutions and regulations. The selection of leader was an issue and one of the major tasks was to prepare military for the defence as well as the protection of the state. In order to resolve all these issues, finance was the significant need.
A study was conducted on foreign aid, domestic savings and economic growth by (khan & Rahim, 1993).the result indicates a positive but insignificant result statistically of economic growth with its varies form of contemporaneous values of economic assistance. Foreign aid shows statistically a significant positive correlation with economic growth. From the regression analysis the result shows negative correlation between foreign aid and domestic effort. In a whole the result shows a positive relationship among financial aid, economic growth and savings.