Merits and Demerits of Foreign Aid

Topics: Development aid, Investment, Economy Pages: 4 (718 words) Published: September 4, 2013

Advantages of Foreign Aid

Foreign economic assistance is very important for economic development of Pakistan. The advantages or benefits of such assistance are as under: 

1. Foreign Loan Bridges Saving Gap and Balance of Payments

Imports are greater than exports therefore there is always deficit in balance of payments. Foreign loan, aid not only bridges domestic savings gap but also helps in overcoming balance of payments problem.

2. Development Requirements are met

Foreign aid and loan facilities help Govt. to import the required technology and basic raw material with which different sectors of economy can develop and due to utilization of modern machines productivity is enhanced. Thus productivity of various sectors of economy increases.

3. Establishment of Modern Economic and Social Infrastructure

Infrastructure facilities require local and foreign capital, which is very limited in Pakistan. Foreign aid helps government to establish these infrastructures. When construction and other development activities are started in the country, these generate employment opportunities for the people.

4. Level of Technological Increases

With the help of foreign aid which is in the way of technical collaboration or project aid, modern machines are used, which produce super quality goods in greater numbers. Hence by using goods of high quality consumers are benefited.

5. Meeting Emergencies

Foreign aid helps Pakistan in emergencies. Whenever there is an earthquake, flood or some other natural calamities, Food Aid program provides Pakistan different types of food items such as wheat, dry milk etc.

6. Defense Modernization

Modern Fighter Planes, F-16 and other modern warfare technology can only be secured with the help of foreign aid and loan, as Pakistan do not have sufficient foreign exchange to finance this crucial requirement of the country....
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