The Elusive Quest for Growth, Essay Example

Foreign Aid

Angola is one of the least foreign-aid dependent countries in the world. The country has had a fluctuating level of foreign aid, relative to efforts to make repayments on some of the financial aid they receive from international partners.

There has been a general decline in the amount of foreign aid the country has been receiving in the past decade. This is largely owing to the stable political environment and the large deposits of oil and petrol. The country had experienced a long civil war, The Angolan Civil War, from 1975to 2002. However, after restoring peace, development could take place. This led to the sharp increase in foreign funding between 2003 and 2004. The country soon became economically independent with the mining of oil and petrol. It is for this reason that the country managed to maintain a relatively low level of foreign aid.

The country realized and increase in foreign aid between 2007 and 2008. This was caused by the great recession that affected the global economy. Being a country whose main export is oil, its currency suffered considerably.

Foreign Aid and Economic Development

While there have been numerous findings that have highlighted the misuse of foreign aid, foreign aid remains a vital component of economic development in most third world countries. Third world economies have become notorious for their high rates of corruption. This has considerably affected the effectiveness of foreign aid in the realization of real economic development.

A study revealed that the amount of mortality deaths significantly reduced in Kenya as a result of foreign aid funded community health projects. Foreign aid funded community projects have increased the supply and distribution of anti-malaria nets (Sachs). These findings coincide with numerous findings that reveal a significant decrease in malaria-related deaths in the Sub Saharan Africa. This has largely been attributed to the contributions by foreign aid partners.

One of the most evident success story was the 2005 Millennium Project. This project developed a road map through which health care delivery would be improved in all third world countries. This project would require 1^st world countries to cover the costs of these investments. The project was generally successful as these health programs were activated in most of the third world countries.

External Debt

Angola’sforeign debt has been increasing in the past decade. The country experienced a steady increase in foreign debt between 2000 and 2005. However, the country started realizing an increase in foreign debt from 2007. This is largely due to advancements in the oil industry necessitating the introduction of capital.

Debt Service Obligation

The country’s debt service has seen a steady decline over the past decade. This is owing to independence from IMF and the World Bank. The country has since become generally self-sufficient, taking full advantage of the oil and gas deposits to realized economic growth and development.

The 1980 Debt Crisis

The 1980 debt crisis originated from Latin America. During the 1960s and 1970s, most the major Latin American economies took on hug debts so as to finance and trigger industrialization. The main aim was to boost infrastructure so as to boost production and economic development. Since these economies had recorded positive economic growth in the recent past, most bank lent huge amount that peaked at 315 billion in 1983 (Palley).

The 1980s global recession triggered a set of dominoes in the economic world. Since most nations had funded their development using debt, the recession led to the scarcity of credit as high oil prices made operations considerably expensive. The prices of oil did not reduce as oil producers believed an extended period of high prices would help them cover their own debts (Palley). This led to the general increase in interest rates across Europe and the United States.

This led to the eventual deterioration of the Latin American currencies. The affected nations lost the value of their currency by virtue of having so much of their currency in their deposits. Mexico soon announced its inability to service its loans, requesting for negotiations on a feasible repayment scheme. This led to most commercial banks ceasing their lending in Latin America, creating a credit shortage.

Works Cited

Banerjee, Abhhijit V and Esther Duflo. Poor Economics. New York: PublicAffairs, 2011. Print.

Easterly, William. The Elusive Quest for Growth. Cambridge: Massachusetts Institute of Tehcnology, 2001. Print.

Palley, Thomas I. From financial crisis to stagnation : the destruction of shared prosperity and the role of economics. New Yrk: Cambridge University Press, 2013. Print.

Sachs, Jeffrey D. Aid Works. New York: Project Syndicate, 2012. Print.