The problems of foreign aid
Debt servicing. This means the repayment of loans and interest amidst foreign exchange scarcity.
Aid tying: a. Procurement/purchase tying i.e tying LDCs to purchase the equipment from the donor country. This increases the cost of borrowing because it prevents the recipient country from shopping around to find proper goods needed in the cheaper markets that are worth of assistance.
b. Project tying the donor country dictates the projects to be established by the aid given. This prevents the recipient country the freedom to implement the targeted priority projects.
c. Double-tied, meaning both procurement or purchase tied and project tied. This is even made worse during the repayment of the scarce resources by the recipient country.
Wastage. Foreign aid in form of money capital has often encouraged wasteful expenditure by the developing nations.
Political strings/conditions attached. This is common with the aid from industrialised nations.
Capital outflow in form of profit repatriation. This usually is associated with multi-lateral aid. It indeed, deprives poor countries of ploughing back the surplus earnings.
Employment. Most of the projects established through foreign aid in LDC have tended to have a low absorptive capacity for the prospective labourforce of the recipient country.
Lack of continuity, consistence and interlinkages. Projects put up by foreign aid have tended not to have relationship with the promotion of industrialization programmes in LDCs.
Dumping of outdated machinery is common, which rarely completes their lifespan.
Most aid from the developed world has continued to maintain the objective of selling weaponary, and promoting their military pride and show. This is true for countries like USA and Russia.
The aid extending also merely aims at opening up and expanding markets for inputs and intermediate goods from the potential aid donors.
Certain categories of foreign aid is embodied with the extension of the culture of the donor country. This is common for countries like France.
Some countries often give aid in order to promote neo-colonialism e.g Britain as manifested in her policy of commonwealth.
There is often the interest of financing non productive projects. This instead increases the burden of repayment and yet in foreign currency; moreover the said aid or proposed projects may not be export oriented to enable the recipient country to earn the urgently required hard currency (foreign exchange).
Aid received in form of technical experts is still questionable. The so called experts are usually young, inexperienced and mostly sent to gain experience in LDCs but later to be withdrawn to go and work in countries of origin.
Studies made on projects are often written in too technical a language by the so called expert and are merely left after the end of the project. There is no audience given and consequently, no follow up easily made.