Foreign Aid to Alleviate Third World Poverty INTRODUCT

This research examines the arguments for and against the use of foreign aid as a means of poverty alleviation in the Third World. Within the context of this research, foreign aid may be either monetary or goods and services. The issue is examined through the review of examples.

The policies of The World Bank in relation to economic development in SubSaharan Africa have been characterized as everything from a new source of revealed wisdom to a recipe for starvation (Green, and Allison, 1983), while those of the IMF have been consistently criticized (Carvounis, 1984). In this discussion, the policies of the two institutions toward economic development in the region are considered, and this consideration is followed by an examination of the situation in the Sahel.

The impetus for the creation of an organization such as the IMF was provided by events which wracked the international economy from 1929 to the beginning of the Second World War (Horsefield, 1969). In attempts to maintain domestic economic

stability and to retain international market positions, most countries engaged in competitive devaluations, exchange control activities, and imports restriction (Driscoll, 1984). The origins of the IMF, thus, may be traced to an international recognition of the debilitating character of such activities, and of the need to establish some sort of mechanism through which international

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ers to policies that nations are expected to agree to implement and observe, as a requirement, before a balance of payments loan or development loan is extended from any of the special financing facilities. All loans are 7distributed in increments, so that The World Bank and the IMF may monitor the borrowing nation's adherence to the conditions established. The nature of the conditions imposed vary from case to case. More often than not, conditions established emphasize measures which affect balance of payments through the level and composition of demand within the borrowing nation's domestic economy. Conditions may also emphasize supply factors. In recent years, conditions have also often emphasized the creation, within a borrowing nation's domestic economy, of positive interest rates, and the establishment of rational pricing for public services. Rational pricing, in the jargon of economics, refers to realistic, market value pricing. To most developing nations, however, rational pricing is a euphemistic phrase meaning higher prices. Conditions also often support exchange rate adjustments, where overvaluation prevails. The central issues involved in economic stabilization programs are the (1) governmental budget, (

Category: Economics - F