Does Bilateral Aid Benefit the Country's Economy?

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1.1 Description of foreign aid Foreign aid is a relatively simple thing to understand. It is essentially the idea that when a foreign economy is struggling, developing nations can aid the growth of said economy by providing them with some sort of capital. Foreign aid can exist through the mediums of goods, services or financial assistance. Since its inception post World War 2, foreign aid is seen as a staple in the modern world when moving towards a more centralized market throughout the world. It has been though that it increases the relationship of those involved in it, creating stronger ties with foreign economies and facilitating the expansion of the global economy. These were the original ideas that were used to promote the idea of aid. Today however, it is used mainly to help struggling and dying economies to keep their heads above water. 1.2 What is Bilateral Aid? There are several different types of aid that could be analyzed. But, there is one major one that is causing issues with economists in the world today and that is bilateral aid. Bilateral aid is the least regulated type (multilateral flows through financial intermediaries and is therefore more governed by international regulations 2. Literature review To demonstrate that bilateral aid does not always work in the way that it is supposed to. Proof will be provided by analyzing important works by several researchers/economists significant experience in terms of developmental economic theory and foreign aid. 2.2 Why foreign aid is not always helpful There is no arguing that when economic aid is instituted correctly it can be a driving force behind development. But, when this aid is not handled properly it can stagnate growth and in some cases, have a negative... ... middle of paper ... can be ineffective if it is not properly regulated, if there is not a significant amount of control placed on the way that the capital is invested it could result in an increased amount of dependency on donor nations. Rapley (2007) argues that the focus of aid must be streamlined in order to strictly help an economy with no frivolity added. In his paper he proposes that the only way to do this is to create a system in which reliance on primary good based markets is reduced. It should blanket the economy to create a more active environment geared towards growth of all sectors of an economy. One of the major issues with bilateral aid is that it only seeks to increase the viability of the current economic situation. What it should be doing is discovering new areas of an economy that can be helped, creating new sectors that rely more on technology and skilled labor.

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