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Aid & Debt

 
  Africa’s massive external debt burden is the single biggest obstacle to the continent's development and to the fight against HIV/AIDS. In the 1970s and 1980s, low-income countries in Africa got to owe a huge amount of foreign debt, which accumulated under corrupt regimes in the 1970s and 80s. Although the Paris Club and other bilateral creditors rescheduled considerable amount of debts, poor countries still had to spend countless years repaying billions dollars in loans. As a result, a new initiative was called for to address the concern that these debts were stifling the efforts to development and poverty reduction.

Since the introduction of Millennium Development Goals (MDGs), foreign aid has become one of the most attention-grabbing issues among many development actors. Historically, various forms of foreign aid have assisted developing countries to recover from natural disasters, alleviate poverty and starvation, and build infrastructure necessary for development. Nevertheless, foreign aid has not always been able to bring about expected outcomes. In some cases, foreign aid even hindered recipient countries from potential development or growth.

Most of the aid recipients were forced to repay debts that are far larger than their original loans, which prevented them from spending the aids on constructing social infrastructure such as education and health care systems. In other cases, the donor countries demanded the recipient countries to pay for over-priced goods and services in return for the aid, which eventually made the recipient countries more dependent on the donors’ aid. Sometimes, aids are even used as a foreign policy tool; donor countries only assist countries or regions that correspond with the developed countries’ political or economic interests. Other philanthropic NGOs and charity groups, for their own interests, likewise require the aid recipients to meet certain conditions and agree on certain terms. Furthermore, aids are often not distributed effectively in public sectors, but instead go into the pockets of corrupted government officials.

To make aid more effective, the amount of aid should be increased to at least meet the agreed proportion of 0.7% of GNP of each developed country as specified in MDGs. Learning the priority of poor countries’ needs and local circumstances would enable aids to be invested in where it is most needed. Moreover, aid for establishing basic social infrastructures would help build the capacity for developing countries’ economic growth, stability, and independence.

While aid increase is important, Debt cancellation can also make a huge difference in developing countries’ situations. As mentioned above, unsustainably huge debt is one of reasons that exacerbate poverty. Among the 600 million people living in forty most debt-burdened countries, about half of them live with less than a dollar a day.
   
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