Foreign economic aid is at the cross-roads. There is an
atmosphere of gloom and disenchantment surrounding international aid in
both the developed and developing countries — more so in the former than
in the latter. Doubts have grown in the developed countries, especially
among the conservatives in these countries, as to the effectiveness of
aid in promoting economic development, the wastes and inefficiency
involved in the use of aid, the adequacy of self-help on the part of the
recipient countries in husbanding and mobilising their own resources for
development and the dangers of getting involved, through ex¬tensive
foreign-aid operations, in military or diplomatic conflicts. The waning
of confidence on the part of the donors in the rationale of foreign aid
has been accentuated by an increasing concern with their domestic
problems as well as by the occurrence of armed conflicts among the poor,
aid-recipient countries strengthened by substantial defence expenditure
that diverts resources away from development. The disenchantment on the
part of the recipient countries is, on the other hand, associated with
the inadequacy of aid, the stop-go nature of its flow in many cases, and
the intrusion of noneconomic considerations governing the allocation of
aid amongst the recipient countries. There is a reaction in the
developing countries against the dependence, political and eco¬nomic,
which heavy reliance on foreign aid generates. The threat of the
in¬creasing burden of debt-service charge haunts the developing world
and brings them back to the donors for renewed assistance and/or debt
rescheduling.
Food Price Shocks and Household Consumption in Developing Countries: The Role of Fiscal Policy