Why development aid?



It has become common practice for both bilateral donors and multilateral aid agencies to make loans to developing countries below the commercial rate of interest. One obvious reason for this is the competition for exports, which can lead to subsidised credits in the hope that export sales of manufactured products or sales of surplus agricultural commodities are thereby promoted. The boundaries become a bit blurred when subsidised loans are given for infrastructure that makes private foreign investment more profitable, or loans to promote benefits from trade in the long-term. The present work, however, focuses on loans without any clear commercial qui pro quo. The author presents five arguments.


JEL: F21, F35


Aid, exports, subsidised loans, private foreign investment, trade

Full Text:



  • There are currently no refbacks.

Copyright (c) 2016 P. STREETEN

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.



Sponsored by   

ISSN 2037-3643

Reg. Tribunale di Roma n.377/2009 del 19/11/2009