Truth about foreign aid to developing countries


JF-Expert Member
Aug 11, 2011
Katika pitapita yangu kwenye online newspapers nimegongana na hii habari, nikaona si vibaya kuiweka hapa tuipitie, maybe it has been discussed before but there is no harm if we can remind ourselves. Go through and give your opinion about it;

By Shenali Waduge
It is predicted that by 2020, total world debt would reach $200 trillion and 963million people live in hunger. Every day 16,000 children die of hunger-related causes. These are the very countries that not only take loans but end up becoming prey to IMF and World Bank structural adjustment programmes that seal their economic downfall forever.
When a country falls into debt, it means it owes money. Inability to pay that money is likely to lead to bankruptcy. Countries that fall into debt generally to Western governments and international institutions controlled by the west, suffer economically and socially.
How debt was created
This is a question most of us like answered. The debt crisis began when powerful nations began to spend more money than they earned and ended up printing notes which lead to the fall in value of these notes. This crisis took place in the early 1970s when oil-producing countries formed OPEC (Organization of Petroleum Exporting Countries) began to increase oil prices to gain additional revenue because of the dollar falling in value. The profits these countries gained were invested in Western banks which soon began to start lending to Third World nations at low interest rates. These countries too began taking the loans without thinking or planning how it would repay. When the US increased interest rates in the early 1980s to stop inflation in developing nations that had taken loans, ended up having to take more loans to repay the interests on the former loans. This resulted in debt repayment draining $160billion annually from developing nations which ironically was threefold of what these countries had actually received as development aid. That was how petrodollars became transferred to the developing world & returned to the developed world through export purchases. By 2002 that debt trap had reached $2.5 trillion. The only means to pay back was through sale of valuable resources.
Why did they borrow?
Third World nations borrow simply to finance projects in its country. Unfortunately, the bulk of these projects do not address fundamental areas first and more often than not these projects are meant to benefit creditors requirements. Most aid given is tied to agreements that eventually benefit the creditors and not the people of these developing nations. Every loan taken comes with the assurance of interest payment and these payments must be paid in dollars or sterling pounds. For Governments to make such payments they need to produce cash crops for international exports, but what most Governments are not told is that other nations receiving aid have also been asked to produce the same cash crops like coffee, tea, cotton, cocoa, but prices began to fall since too many countries were producing the same crops which created low market prices. Countries that take loans and end up having to concentrate on developing cash crops end up neglecting to develop its own agriculture to feed its population. Third world countries were earning less for their exports and paying more interest for the loans needed to import resulting in borrowing more money to pay off the interest
Despite aid pouring, people end up with no food to even eat. Another ploy used by western companies is to persuade poor nations to buy their goods and services without money, often linked to IMF and World Bank assurances. Eighty percent of American foreign aid actually returns through exports tied to that aid. Borrowing nations that head towards defaulting, has the IMF quickly entering the impose austerity measures which again are designed to increase foreign exports which again translated means continued suffering for the people.
Therefore, people of developing nations should not be over excited over aid given. In reality, aid never leaves the donor country – it only gets credited to institutions in these donor countries to which money is owed. Thus loans are given with one hand but twice the amount is taken back! Let not politicians in developing countries fool the public with regarding to such aid packages given. In reality the developing world end up paying $13 on debt repayment for every dollar it receives in grants. In case people may not be aware part or most of the aid developing nations actually receive is actually wealth belonging to the elite of developing countries which have been deposited in foreign banks. Countries eventually end up taking loans to repay previous debts and nothing in the form of development actually takes place in these countries except areas that are camouflaged to look as if development is taking place.
The vicious “borrowing” cycle
Governments do not make money. Banks do. They give loans by money that does not exist. Loans are mere promises to supply money that they do not possess. Repayment of loans however has to be in money. Ninety five percent of all money in existence is debt money, which is owned by the banking system.
Bankers are able to siphon-off economies of impoverished nations. Officials of IMF and World Bank on the pretext of “development” has worked towards ensuring continued benefits to wealthy lenders & MNCs in the industrialized world while people of the Third World remain slaves to loans, debt relief, international assistance etc. given as if they are doing a favour but tied to strict conditions which further suffocates these nations. Governments are made to promise “financial stability” in order to receive these “gifts” but behind the scenes they make the country’s environment so tense that their gifts are taken by further tightening the noose around the necks of these impoverished nations. Even humanitarian crisis situations have become lucrative business for those who can lend money.
It should come as no surprise that the number of globally operational transnational corporations have reached over 40,000. Among the 100 largest “economies” in the world today, over half are corporations and not countries. Just 200 corporations control almost a third of the world’s economic activity yet employ less than .025% of the world’s workforce.
The world’s 500 billionaires have a combined wealth of over $1.55 trillion which is well over the combined GNP of all the nations in the sub-Saharan Africa or hose of Middle East and North Africa. 500 billionaires who have everything against 5 billion people who have nothing!
Yet surprisingly it is not only the developing world that is in debt, so too is the US. Its accumulated debt is more than 2 trillion dollars which is almost equal to that owed by the entire developing world. In other words 300million Americans owe the rest of the world as do 5billion people in the developing world. What differs is that US pays only $20billion annually while developing nations have to pay more than $300billion per year.
Yet, US continues to enforce its political will, while Third World nations are made to abandon their political will & follow SAP (Structural Adjustment Programmes) and are trapped for ever.
Who are the supposed “rescuers” who have the answers to the debt crisis? The two rescuers are IMF and the World Bank. Their actual task however is to make sure these developing nations continue to pay their debts by offering new loans that are “structured” to suit the sustainability of the developed world. Both these entities are influenced by various international banks, financial consultancies & former politicians who manage the wealth of the world on behalf of wealthy clients. The “Group of Thirty” formed in 1978 are a group of international representatives that examine choices in economy & even influence policies governing countries. Their role is to ensure more wealth returns to the wealthy. With such personalities controlling the world it is prudent to ask what nonsense the Millennium Development Goals set up by the UN are.
Both IMF and the World Bank are western dominated creditors which offer short term loans to pay off other loans given under strict conditions. These conditions are carefully set in programs better known as Structural Adjustment Programmes. They are also known as Poverty Reduction Growth Facility.
Structural Adjustment Programs have 4 fundamental objectives: They are aimed at 1) Liberalization (promotion of free movement of capital & opening national markets for international competition) 2) Privatization (public services) 3) De-regulation (weakening labor laws and curtailing social welfare) 4) Improving global competitiveness.
Based on these objectives the conditions for new loans will first make governments commit to reducing government deficit through cuts in public spending like cutting off food subsidies, health welfare, spending less on education, increasing class size, school fees, reducing number of teachers, freezing wage increases, encouraging more private schools, increasing inequalities between the haves and have-nots, creating internal high interest rates, liberalization of foreign exchange rules and trade facilitation for exports, privatization of public enterprises, liberalization of foreign investment, keeping to low labour wages, abolishing price controls, lay offs in governments industries/services, imposition of new taxes, lower import barriers, removal of restrictions on foreign investments, expand production on export oriented items, currency devaluation, sale to foreign investors, small farm growing staple food replaced with export crop farming wherein the outcome is farmers growing food that are exported & nothing or very little for local consumption.
If any of these are being promoted by a government prior to or after receiving any aid package the public should know exactly what is going on and on what conditions the country has had to commit itself towards obtaining the aid!
The outcome of these “conditions” result in state enterprises being sold for tuppence, tax reforms further burdening the middle-income groups while general tax holidays are given to large scale foreign investments, deregulation of banking systems creates high interest rates making goods to skyrocket, eliminating subsidies further increases prices while free movement of foreign exchange allows foreign companies to repatriate their profits which in reality is siphoning off what should actually belong to that country. This allows “money laundering” from offshore banking accounts. Denying free health and forcing people to pay for healthcare increases the number of people without access to proper healthcare wherein thousands end up dying as a result. Most of these social services are now outsourced to NGOs who are funded by international aid agencies but their presence in the developing countries is more than just doing social work. Many Governments tend to allow NGOs to make their presence in their countries because of the flow of foreign currency. Layoffs in public sector mean increase in unemployment while export oriented agriculture and elimination of subsidies further increases unemployment. All these put together naturally creates “failed states” but that accountability must and should fall at the doorstep of the IMF/the World Bank & the developed nation and the policy makers who design these schemes to ensure that developing nations are saddled into debt forever so that they can remain developed!
SAP is nothing but a means to force countries to reshape its financial and economic systems along neo-liberal lines.
In Africa and Latin America more than 500,000 children under the age of 5 have died in the late 1980s due to imposed SAP conditions. Children are suffering from malnutrition because farmers have been forced to shift from food production for local consumption to producing crops to be exported to the industrialized world. Such export-oriented food production has devastated traditional agriculture and has resulted in farmer bankruptcy,in India how many farmers are committing suicide?
Whenever SAPs fail, the IMF and World Bank are quick to blame the host government which they will accuse of incompetence, corrupt and lacking motivation to follow through its suggestions. Host governments have no answers but to accept these loan handouts and have future generations born into debt. It eventually ends up with internal uprisings.
Governments may agree to accept loans, they may also not think twice about the conditions being imposed where subsidies towards health, education, agriculture etc have to be curtailed and privatization encouraged because most in Governance end up pocketing part of these handouts and securing these in offshore bank accounts but when uprisings eventually take place they have no choice but to brutally crush these uprisings. This is one method of making Governments unpopular in order to instill another set of people who will continue to say “yes” to foreign dictates.
Governments and their leaderships are silent to the reality that prevails because they would rather have some flow of aid coming in and with the realization that they cannot break the system but become part of it they end up joining that corrupt circus and this is more or less the world order. So if we fail to understand why politicians do as they do it is now easy to see that they have little choice in doing anything different and if they did they would soon end up out of power! But, Sri Lanka’s politicians must always remember that ours is a fertile land and it takes just a little initiative to ensure we have enough food to feed 20 million, despite economic downfalls we have to face.
Who is loaning money?
This leads to the next most important question of who is loaning money since it is not coming from the US. Part of the money being loaned comes from “dirty money” that is illegal activities. US and European banks launder between $500 billion to $1trillion of dirty money annually. New York, Florida, Texas & California are the top 4 money laundering states in the US & coincidentally these states raise 80% of presidential campaign funding. Nevertheless this doesn’t answer any of the problems that ails the developing world.
The best possible solution would be the cancellation of all debts with the acceptance that debtors and creditors have made mistakes. A better suggestion would be to start developing regions instead of giving loans to countries. A thorough needs assessment would enable a properly managed flow of loans that would become productive and help steer sustainable economic profits. Developing countries that are saddled with debt need to have a trade surplus since they have to pay interest on the accumulated international debt. If they only end up borrowing their debt is likely to get larger and larger.
It may be prudent to also consider replacing the World Trade Organization with a body that will ensure it has the mandate to support trade policies that will benefit not only a few. Today the bulk of wealth lies in the hands of a few corporations who not only control the world they even control the policies that govern nations, these corporations are so powerful they can even weaken labour laws of a country.
A new system of checks and balances need to take place and the entire global financial system needs to be restructured. For years the developed world has been draining the poor and there has to come a time that this ugly practice must stop. Adding insult to injury is the manner in which the developed world acts.
Obviously the World Trade Organization has done little to help the Third World and it is probably time to consider replacing it with a body that will ensure it has the mandate to support trade policies that is not meant to only benefit some. It is easy to fathom that the bulk of wealth lies in the hands of a few corporations who needless to say actually control the world and even the policies that govern countries, these corporations even have the power to weaken labour laws in order to ensure they benefit economically. A new means of checks and balances need to take place and a total restructuring of the global financial systems is a must.
The main thrust should be towards ensuring that all the countries of the world have schools, medical facilities and the basic infrastructure needed to survive. Countries must now need to get together and demand that the IMF stop its structural adjustment programmes purely because aid given is not really given, for it is taken back twofold through trade agreements or by forcing countries to follow their economic conditions. Free trade needs to be replaced with fair trade. When Governments are elected by the people it behoves that Government to expose these high-handed means of world financial bodies so that the people of these countries are aware to what extent the Governments are tied. It is pointless projecting oneself as all-powerful in the eyes of the public if Governments eventually have to agree to everything foreign bodies thrust upon them. Why can’t any Government tell its farmers the reasons why they are suffering? This is real transparency for a world that belongs to all human needs to have “equal” economy and the wealthy needs to realize that they cannot continue to drain the poor therefore the current system of embezzling from the poor must stop.
How can the developed world devise ways to take from the developing world and then give back what is taken as aid and new loans which are tied to further economic agreements that only suits the developed world? Between 1983 and 1993 IMF had taken $2.9billion more from developing nations than it had given in new loans. Why cannot the IMF sell off its gold reserves – it has over 100 million ounces of gold. Selling off this would free hundreds of nations that the IMF and developed countries have forced into debt.
The greatest irony is that the entire cycle of debt and poverty created by the IMF and World Bank has been done so using money created out of nothing. What it means is that money of the loan never even goes into the economy of the country that receives the loan.
If people of Third World nations are suffering today it is solely due to the debt-related poverty devised and designed by the developed world combined with the mismanagement and unpatriotic leaderships of political leaders of developing nations who fail to read through the strategies being used and who fail to counter them with equal cunning.

SEAL Team 6

JF-Expert Member
Jun 10, 2011
Mkuu tunashukuru sana kwa kutujuza ingawaje hatujui kilichoandikwa, tungefurahi sana ikiwa ungetutafasilia kwani maandishi yametoka vizuri. Mkuu sisi wengine mwalimu wa somo alikufa kabula hatujafanya mtihani wa darasa la saba, halafu alikuwa hajamalizia topike zote. Kha!!! haya ndiyo madhara ya kuongozwa na Magamba kwa miaka 50.

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