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What is aid?
Aid is the administered transfer of resources by a donor country or international agency or non-government organisation to less developed countries to encourage economic growth. It can be between two (bilateral) or several (multilateral) countries/institutions
• Bilateral aid is generally tied aid is while recipients should purchase products through the donor country. An International Monetary Fund loan with a conditional SAP attached is other illustration of tied aid.
• Multilateral aid is generally untied aid which can be spent into any country.
a. Argument for tied aid: the donor country makes sure aid is used for suitable purposes and its own economy advantages
b. Argument against tied aid: purchases may not show best value for money
c. Tied aid is frequently conditional for example on market reforms
• Grants that do not have to be repaid
• Concessional loans repaid at lesser interest rates and over longer eras than commercial bank loans.
• Aid can be into the form of goods, money or technical assistance.
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