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International Debt and Dependence: Chapter 6: A. Hamid Shahid

This document discusses foreign assistance and international debt. It outlines the different types of foreign assistance including grants, loans, and private investment. It then discusses the importance of foreign aid to Pakistan, listing 10 ways it can help the country like removing capital shortages and raising employment. The document also defines two types of debt - internal/domestic and external/foreign debt. It lists causes of increasing debt burdens like borrowing without analysis and budget deficits. Finally, it provides measures to reduce external debt like increasing foreign exchange earnings and cutting non-developmental spending.

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79 views7 pages

International Debt and Dependence: Chapter 6: A. Hamid Shahid

This document discusses foreign assistance and international debt. It outlines the different types of foreign assistance including grants, loans, and private investment. It then discusses the importance of foreign aid to Pakistan, listing 10 ways it can help the country like removing capital shortages and raising employment. The document also defines two types of debt - internal/domestic and external/foreign debt. It lists causes of increasing debt burdens like borrowing without analysis and budget deficits. Finally, it provides measures to reduce external debt like increasing foreign exchange earnings and cutting non-developmental spending.

Uploaded by

rabia liaqat
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© © All Rights Reserved
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International debt and dependence

Chapter 6: A. Hamid Shahid


Foreign Assistance

• Foreign assistance is aid given by the foreign countries to other


countries to support global peace, security, and development
efforts, and provide humanitarian relief during times of crisis.

• Assistance to foreign nations ranging from the sale of military


equipment to donations of food and medical supplies to aid
survivors of natural and manmade disasters.
Concept of Foreign Assistance
• Gants
• Development loans
• Official loans
• Foreign private investment
• Tied and untied loans
• Bilateral and multilateral loans
• Financing of BOP
Importance of foreign aid to Pakistan
1. Remove paucity of capital

2. Removal of technological backwardness

3. Construction of infrastructure

4. Establishment of key industries

5. Exploration of natural resources

6. Raising the level of employment

7. External and internal economies of scale

8. Economic and social changes

9. Removal of BOP deficit

10. Increased govt. revenues


Debt and its types

Two types

1. Internal/domestic debt

2. External/ foreign debt


Causes of increase in debt burden and debt servicing charges
1. Borrowed from external sources

2. Nature of aid goes on to change.

3. Tight conditions

4. Borrowing without cost benefit analysis

5. Low saving and limited taxable capacity


Causes of increase in debt burden and debt servicing charges
6. Compound interest rate is charged

7. Devaluation

8. Budget deficit

9. Imports are not matching exports: external deficit is increasing


Measures to reduce external debt burden
1. Increase in Foreign exchange earnings

2. Cutting of non-developmental expenditures

3. Stability in external value of the currency

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