External aid

Commerce

External or foreign aid is the voluntary assistance of third parties granted to a country.

Generally, this assistance is associated with money. However, this can be presented as human resources, food and humanitarian aid, for example. Likewise, the delivery of said resources may have different motives, from altruism to political and economic interests.

In this sense, a government could donate capital to another for having adopted policies that benefited its interests. For example, welcoming immigrants into their territory.

Classification of foreign aid

One way to classify foreign aid can be through sources. In this sense, depending on the entity that is sought, the aid could have a specific objective.

The different origins of foreign aid are described below.

Official Development Assistance (ODA)

One of the most popular forms of aid is ODA. This type of aid is made from advanced countries to emerging or developing economies. The main features of ODA:

  • It comes from governments, not individuals. These can be national or state governments.
  • They are destined for programs that promote economic development. Consequently, it encourages policies that improve the quality of life and income level of the inhabitants.
  • It can be considered as a donation without repayment, or as loans with low or no interest rates.

Multilateral organizations

Some multilateral organizations, such as the IMF or the World Bank, may grant aid to solve an extraordinary situation. For example, in the event of natural disasters or serious economic crises.

Bilateral aid

This aid is what one country gives to another. This aid does not have a standard objective that is applied to it, and depends on the agreements between States.

Non-governmental organizations

These organizations include non-profit and charitable organizations. These donations are directed for a specific purpose, such as solving the shortage of drinking water in a community. However, they can also contribute to large projects such as reducing extreme poverty or education projects.

Non Governmental Organization

Positive and negative aspects of foreign aid

Some of the positive aspects, in general, that external aid provides are:

  • It contributes to improving humanitarian crisis situations. The countries that are going through these situations are incapable, by themselves, of solving them in the short term.
  • The organization, or provider country, improves its international image and its influence over the aid recipient country.
  • Strengthen relations between countries or organizations.
  • It constitutes a push for developing and emerging countries to improve their economic development indicators. However, responsible policies are required to achieve the goal.

Some negative aspects attributed to this type of assistance are:

  • It encourages corruption in poor countries and is a source of enrichment for elites.
  • It generates dependency in these economies and delays their chances of achieving development.
  • Donors could generate negative interference on the domestic policies of recipient economies.

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