SOC300_W2 - SOC300 Week 2 International Finance Slide Slide...

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SOC300 Week 2: International Finance Slide # Slide Title Slide Narration Slide 1 Introduction Welcome to the Sociology of Developing Countries. In this week’s lesson, we’ll see how the machinery of International Finance works to reduce poverty. Slide 2 Topics The following topics will be covered in this lesson: Aid and corruption; and Loans and interest. Slide 3 Aid and Corruption The global economy is more integrated than ever. Countries are exchanging more goods and services, international financial flows have increased and private investors are active in many developing countries. But even in an expanding world economy, many countries cannot finance their own development, and it is here that aid is especially helpful in filling the gap. Development is a partnership between developing and donor countries. Donor countries help recipient countries build the capacity to foster change and recipient countries invest in their people and create an environment that sustains growth. Countries that have difficulty tapping financial markets must rely on aid flows from wealthier countries to fund development programs. Official development assistance to developing countries reached over one hundred and thirty billion dollars in 2010, the highest ever in nominal terms representing a three point two percent increase over the 2009 level. In 2010, the top four international donors the United States, the European Commission, France, and Germany contributed fifty-three percent of all global aid, but a large part of this increase came as debt relief, not new aid flows . Aid in absolute terms is measured as a share of donors’ gross national income and has declined between 2005 and 2007, but has increased since then. Still, a significant increase in donor commitment is required to meet the targets set by the UN. The form of aid and purpose for which it is given makes a difference. Debt-related aid provides relief from liabilities that recipient countries have difficulty servicing, and can free
up public resources for other purposes, but it may not result in an equivalent expansion of development activities. Humanitarian assistance provides relief for sudden disasters and emergency situations, but it does not generally contribute to financing long-term development. Moreover, the administrative costs of providing aid are mainly spent in the donor economy. Aid is not the only source of development finance or, for many countries, the most important. Remittances and private capital flows are a growing source of financing for some. Remittances received worldwide more than tripled in the past decade, from one hundred and thirty six billion dollars in 2000 to four hundred and forty-nine billion dollars in 2010, but extremely poor countries, especially in sub-Saharan Africa, still require substantial increases in aid to reach their development goals.

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