Repayment of loan by home currency refers to soft loan. If repayment of loan requires foreign currency then such is called hard loan. Sixthly, foreign aid may be hard or soft loan. In case of the latter, the donor countries, “surrender control over the uses of those funds and agree to abide by the decisions which they make with other members of the agency or institution.” B, ADB, aid from global and regional development banks, some United Nations agencies, and aid consortia consisting of the principal donor countries and creditors of any given LDC, e.g., the ‘Aid India Club’). Again, aid may be either bilateral (i.e., nation-to-nation programmes of aid of particular countries) or multilateral (IMF, W.
It may take the shape of capital goods, technical assistance, agriculture commodities or even military support. Second, aid tied to exports from a single donor country may buy less than unrestricted (‘untied’) aid, if prices in the donor country are higher than elsewhere.įifthly, foreign aid may take a variety of physical forms. Purchase of one country’s products initially implies continuing demand for spare parts and on-going technical advice on operating the imported equipment. This imposes a permanent burden on the aid- receiving countries. First, projects with large import content are eligible for more aid than those using domestic inputs. Donors often force recipients to spend their loan amount in the country where the aid originated. Such transfer may also replace existing purchased agricultural imports and thus release foreign exchange for buying capital or other consumption goods.įourthly, aid is often given in a tied or non- tied form. Such commodities may serve the purpose of capital goods if through such transfer of resources in the importing country previously used in food production are shifted out of agriculture into (i) export production to provide foreign exchange to pay for imported capital goods, and (ii) capital formation, to the extent that domestic capital is in short supply.
#Sononym developing free
Government provided agricultural commodities (mostly wheat) to India under PL 480 and 665 free of cost subject to the payment of transport costs in hard currency. Programme aid embodies more general support, for example, for the activities of sectors as a whole such as agriculture or education, or for balance of payments support without reference to the goods being bought with the proceeds of the transfer.” Project aid allows the donor to influence and control the uses to which aid is put. Kindleberger: “Project aid is embodied in loans or grants that are intended to pay for specific projects. Secondly, foreign aid may be project and programme aid. But grant-recipient countries sometimes may be asked to purchase commodity or ‘consultancy services’ from the grant-donor countries. However, outright grants do not have any obligation of interest payment or anything else. Loans are required to be repaid with interest, however, on concessional terms. Broadly, loans and grants are the two forms of foreign aid.
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