Foreign aid

In international relations, aid (also known as international aid, overseas aid, foreign aid or foreign assistance) is – from the perspective of governments – a voluntary transfer of resources from one country to another.

Aid may serve one or more functions: it may be given as a signal of diplomatic approval, or to strengthen a military ally, to reward a government for behaviour desired by the donor, to extend the donor's cultural influence, to provide infrastructure needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial access. Humanitarian and altruistic purposes are at least partly responsible for the giving of aid.

Aid may be given by individuals, private organizations, or governments. Standards delimiting exactly the types of transfers considered "aid" vary from country to country. For example, the United States government discontinued the reporting of military aid as part of its foreign aid figures in 1958. The most widely used measure of aid is "Official Development Assistance" (ODA).

The Development Assistance Committee of the Organisation for Economic Co-operation and Development defines its aid measure, Official Development Assistance (ODA), as follows: "ODA consists of flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, and b) it is concessional in character and contains a grant element of at least 25% (calculated at a rate of discount of 10%)."[1] (OECD, The DAC in Dates, 2006. Section, "1972".) Foreign aid has increased since 1950's and 1960's (Isse 129). The notion that foreign aid increases economic performance and generates economic growth is based on Chenery and Strout's Dual Gap Model(Isse 129). Chenerya and Strout (1966) claimed that foreign aid promotes development by adding to domestic savings as well as to foreign exchange availability, this helping to close either the savings-investment gap or the export-import gap. (Isse 129).

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