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Evaluation of the Success of Two Contrasting Strategies Used to Narrow the Development Gap

Updated on June 29, 2016

The focus of this response will be on the vehicle for attempting to narrow the development gap: aid versus debt cancellation. Aid has been in the eye of the public in more economically developed countries (MEDCs) since the mid-twentieth century, whereas debt cancellation became a popular method for the International Monetary Fund (IMF) and other institutions based in more economically developed countries (MEDCs) to keep the debt of LEDCs at sustainable levels in the 1980s.

The IMF is seen by some as a form of neo-colonialism; its structural adjustment programmes (SAPs) force LEDCs to reduce public service spending and regulation of industries, and increase privatisation. The IMF argues that its actions in Uganda during the 1990s lifted millions of people out of poverty, and whilst public healthcare spending did increase, and primary education was made free after the SAP ended in the late 1990s, the sustainability of the project is questionable; developing countries continue to take loans from private credit agencies, and within five years of debt cancellation under the Heavily Indebted Poor Countries (HIPC) initiative, debt had returned and even surpassed previous levels of debt relative to gross domestic product (GDP), with countries such as Congo having over 50%.

On the other hand, aid has the potential to be extremely sustainable, especially when in the form of bottom-up, community lead projects, which are generally associated with non-governmental organisations (NGOs), i.e. voluntary aid.

However, there are numerous types of aid; whilst voluntary aid projects, such as WaterAid in Mali, have provided tangible improvements to the quality of life via appropriate technology, top-down projects, which often come from multi-lateral and bi-lateral aid, tend to be less sustainable, and can have negative effects on both the environment, and the lives of many people, especially in the short-term.

Tied aid is frequently bi-lateral, and intends to benefit the donor country massively. One such example is £234 million from the UK to Malaysia in the early 1990s, in return for Malaysia buying £1 billion of British fighter jets; the money was to be spent on the Pergau Dam. This dam required further investment from the Malaysian government, and is largely unsuccessful, only being able to produce electricity at certain times of the day, when there is sufficient water. Consequently, it has done little to improve people's lives, and narrow the development gap.

In conclusion, the IMF's debt cancellation provides short-term benefits to developing countries, but is fundamentally unsustainable; similarly, aid is likely to be unsustainable if tied, but can have tangible benefits if the local needs are taken into account.

WaterAid helps the most impoverished people across Africa.
WaterAid helps the most impoverished people across Africa. | Source

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