By I. M. D. Little
Read Online or Download Aid to Africa. An Appraisal of U.K. Policy for Aid to Africa South of the Sahara PDF
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Extra resources for Aid to Africa. An Appraisal of U.K. Policy for Aid to Africa South of the Sahara
C. C, has in fact already discussed the problem of home costs with reference to East Africa, but any success the Committee may have had with its members has not been enough to solve the problem. Moreover the problem is not limited to East Africa. C, on a regional basis. Any commitment by donors to finance the local costs of projects they supported (up to the limit set by the fact that some financial interest on the part of the recipient is in some cases desirable on other grounds) would increase competition by donors to secure for themselves the projects with a high import content.
We turn now to some of the other aspects of donors' policies which influence the effectiveness of aid. 1. Procurement Policies Most donors, whether for balance of payments reasons or for commercial reasons, limit the use' of most of their financial aid to payment for supplies from themselves. In other words, loans and grants to underdeveloped countries are now mostly inconvertible, or, to use more normal jargon, aid is " t i e d " . F. T. outlaw this particular method of export promotion. K. aid used to be completely untied.
It is not merely that the recipient cannot buy imports in the cheapest market. That is the main purpose of tying : and it may be better that countries with over-valued currencies should give some aid rather than none. There are other more serious effects. Above all, aid-tying gives rise to the " h o m e c o s t " problem. African countries, even the minority who have acquired central banks from which they can freely borrow, have so far adopted a very orthodox approach to monetary policy. Finding themselves short 2 of domestic f u n d s , they must adopt one or several of the following three undesirable courses: (a) they may refuse aid because they cannot raise the domestic funds needed to meet the home cost part of projects; (b) they may give priority to projects which have a high import cost; (c) they may maximize the import content of particular projects.
Aid to Africa. An Appraisal of U.K. Policy for Aid to Africa South of the Sahara by I. M. D. Little