Foreign Aid Essay

2682 Words Aug 12th, 2012 11 Pages
Introduction:
The standard definition of foreign aid comes from the Development Assistance Committee
(DAC) of the Organization for Economic Cooperation and Development (OECD), which defines
Foreign aid (or the equivalent term, foreign assistance) as financial flows, technical assistance, and commodities that are;
(1) Designed to promote economic development and welfare as their main objective (thus excluding aid for military or other non-development purposes); and

(2) Are provided as either grants or subsidized loans.

Grants and subsidized loans are referred to as concessional financing, whereas loans that carry market or near-market terms (and therefore are not foreign aid) are non-concessional financing.

According to the
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Donors also provide aid indirectly as multilateral assistance, which pools resources together from many donors.

The major multilateral institutions include the World Bank; the International Monetary Fund; the African, Asian, and Inter-American Development Banks, and various United Nations agencies such as the United Nations Development Program.
In terms of total dollars, the United States has consistently been the world’s largest donor (except in the mid-1990s when Japan briefly topped the list) Reasons as to why donors give aid:
Donors have a variety of motivations for providing aid, only some of which are directly related to economic development. There is little question that foreign policy and political relationships are the most important determinants of aid flows.
During the Cold War, both the United States and the Soviet Union used aid to vie for the support of developing countries with little regard as to whether the aid actually was used to support development.

The two largest recipients of U.S. foreign aid (including both OA and ODA) from 1980 until very recently were Israel and Egypt, as the U.S. provided financial support to back the 1979 Camp David peace agreement.

Beginning in 2002 Iraq became the largest aid recipient in the world, and its reconstruction is likely to become among the largest single foreign aid program ever recorded. Taiwan and China have used aid (among other policy

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