Foreign Aid is bad?

Im preparing for tomorrow's debate prelim using stuff from google,wiki and of course motivation+ideas from friends on orkut and yahoo.'Foreign Aid is a dangerous and addictive drug'.Im not seriously into the debating thing though, the whole point in participating being that while i prepare for the event, I increase my knowledge on random facts about the economies of the world.(yes, you can take that as a disclaimer in case I dont get through:D)..Since its 1:20 AM IST, I shall rather quickly try and put in an orderly manner, the facts I may put forward(note the formal tone, fine tuned in preparation for tomorrow:P).This is the first time these lethal facts are being combined!!:|

Foreign Aid is mostly of the economic type, given by the developed countries(US, Europe,Australia) to the developing countries(non europe,non US,non Australian :|).it may also be done by NGOs like ActionAid, Oxfam, MercyCorps etc. or UN branches like IMF and also World Bank.The aid is mainly to fund

• Aspecific project OR a specific sector.
• Budget support.
• food/military.
• Untied(recipient has full choice how to spend OR the opposite, Tied.
• Technical(movement of doctors,engineers etc)
• and finally, Emergency(flood,famine,natural calamity,war)

Although plenty of financial help is given by the DAC(Development Assistance Committee) as well, in addition to the former, free cash is almost NEVER available.The money is alawys given as a loan, with very low percentage interest(less than 1% mostly) , yet , due to the enormous amounts of money being transacted, the payout is normally disproportionally high.Estimates up till 2005 show that 3rd world countries have paid(or have to pay) 13$ per dollar that they borrow.It mayb be claimed that the NGOs, World Bank etc do not intend such a situation where the debt becomes s serious problem to the recipients of financial help, but the countries which start taking help, often continue to do so.We fail to see a country which borrowed its way to development.A typical case of addiction to borrowing is the case in Argentina, where hyperinflation durin 80s and 90s caused a fixed exchange rate for the USD to be fixed wrt the local currency,This required that the govt. had in its reserves, a USD for every unit curreny.The country however, continued to print notes and this led to massive dollar loans, and a dire debt situation.Finally, when the exchange rate was unfixed, the local currency crashed and now the industries suffer due to lack of investments.

Other cases include the tsunami hit region's countries which continually borrowed money.The countries, though they had much of their debts written off are still in huge debt pits.Most of South America borrowed excessively during civil wars.Egypt borrowed huge amounts for the nationalisation of the Suez Canal.

The problem with being in a huge debt, is that it hampers growth.In most cases, the countries are unable to climb over the debt, in which case, if they barely do, are demanded to pay off their debts.In general, they dont.This is a fact which is widely accepted, and a list of HIPC: Heavily Indebted Poor Countries was made, whose loans were to be considered for writing off.34 countries from Africa and 4 others, which were hopelessly in debt were included.Other countries, which were in deep debts were not in a dire enough situation were ignored.But these offers often have hidden agendas.Anyhow, most of the severely affected countries are still to be dealt with.The terms and conditions for a similar debt relief plan by the G8, as alleged by John perkins, a self admitting EHM(Economic HitMan) are as follows:

• countries sell(local market of) education,health,water,electricity etc to MNCs
• discontinue trade restriction supporting local trade
• accept subsidisation of G8 businesses
• creation of trade barriers which threaten G8 businesses.
  

Although many analysts shrug off his ideas, which by the way were published in a bestseller: Confessions of an economic hitman, his boss at the cosultancy firm he worked in, agreed to his claims.The firm convinces leaders to take loans and in turn,diverts NGO money to influential people, who give fraudulent financial reports, rig elections etc.

Also, financial help given by countries may be to neutralise politically, the recipient nation, and to control the resources/ decision of the country.It also widens the gap between the developing countries which receive help and those which dont.

Hence, in general, borrowing is never the way out of a situation, and if indulged in can have serious repercussions.

THANK YOU:D