Types and Characteristics of Foreign Aid

Dr. Sathwinderkar's lecture covers the concept of foreign aid, its types, and significance. It distinguishes between foreign aid and other forms of international capital movement like FDI and portfolio investment. The lecture outlines the criteria for aid, types such as loans, grants, project, and program aid, and discusses tied and untied aid. It also explains the forms aid can take, including bilateral and multilateral agreements, and the differences between hard and soft loans.

What is foreign aid primarily associated with?

• Private investments

• Government resources

• Commercial loans

• Personal donations

Which of the following is NOT a criterion for foreign aid?

• Concessional loans or grants

• High-interest commercial loans

• Non-commercial type

• Developmental or charitable aid

Which type of investment is NOT considered a form of foreign aid?

• Private foreign direct investment

• Government-to-government transactions

• International donor agency aid

• Public development assistance

What is the main difference between loans and grants in foreign aid?

• Loans are given by private investors, grants by governments

• Grants are always in cash, loans are in kind

• Loans have to be repaid, grants do not

• Loans are non-repayable, grants are repayable

What is project aid specifically used for?

• Specific projects only

• General support of a country

• Purchasing luxury goods

• Military support

What is a characteristic of untied aid?

• It must be used to purchase goods from the donor country

• It has no restrictions on where goods can be purchased

• It is only for military purposes

• It is always given in cash

What is the main challenge of tied aid for the debtor country?

• It is only available for military use

• It limits purchasing to specific countries

• It is always given as a loan

• It requires repayment in foreign currency

What is the difference between bilateral and multilateral aid?

• Bilateral aid is for military purposes, multilateral is for development

• Bilateral aid has more restrictions, multilateral has fewer

• Bilateral aid is always in cash, multilateral is in kind

• Bilateral aid involves one donor, multilateral involves multiple donors

What defines a hard loan?

• Repayment in the debtor's home currency

• Repayment in foreign currency

• No repayment required

• Repayment in goods

What is a soft loan?

• A loan with high interest rates

• A loan repayable in the debtor's home currency

• A loan with no repayment required

• A loan only for military purposes