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In addition to export earnings and private foreign direct and financial investment, the final major source of Third World foreign exchange is public bilateral and multilateral development assistance, known also as foreign aid.

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Preview of the essay: MACRO ECONOMICS

MACRO ECONOMICS Foreign aid: the development assistance debate The money volume of 'official development assistance', which includes bilateral grants, loans and technical assistance as well as multilateral flows, has grown from about an annual rate of$4.6 billion in I960 to $37 billion in 1986. However, in terms of the percentage of developed country GNPs allocated to official development assistance, there has been a steady decline from 0.51 per cent in I960 to 0 36 percent in 1986. The United States is no longer the major supplier of public economic aid to Third World nations, having been replaced by Japan in 1988. Moreover, its proportion of total development assistance has declined steadily from 59 per cent in I960 to approximately 24 per cent in 1988. Perhaps what is even more revealing is that US development aid as a percentage of GNP now ranks last among 18 industrial country donor nations and is still far below the United Nations tar of 0.7 per cent of GNP. Previous documents showed the decline in 'Official Flows' of foreign assistance in the 1980s, example Table 23.4 lists both the total contribution and the share of GNP given as 'Official Development Assistance' (ODA) ...

... loans. Chile agreed to a two-year International Monetary Fund (IMF) macroeconomic austerity programme beginning in early 1983. With the measures contained in the IMF programme, the economy declined by only 0.7 per cent in 1983. In 1984, the economy grew at the high rate of 6.3 per cent. Continuing foreign exchange shortages, however, limited GDP growth to2.4 per cent in 1985, but in 1986 and 1987, it recovered to 5.7 per cent and 5.4 per cent, respectively. For the remainder of the 1980s, economic policies continued to stress export-led growth and efficient import substitution. Chile was able during these years to achieve moderate economic growth while managing its large1 external debt, Nevertheless, long-term prospects for the Chilean economy will be influenced strongly by this sizable foreign debt ($21.5 billion at the end of 1987, the fifth largest in Latin America and the sixth largest per capita),, the heavy burden of servicing it (interest payments take 37 per cent of export earnings) and the relatively low level of Chile's domestic savings and investment.
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Princess R.

Many countries have been dependent in foreign aid. International assistance from developed countries can help developing and poor countries to surpass their economic problems.

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