 Hi, welcome to the sixth video lecture on Developmental Aid and National Debt. This is the second video lecture of the third module namely Globalization, International Trade, Development Aid and National Debt. Now what do we understand by international aid? Leon Stikumana who is heavily influential in on the subject says, the evidence of aid effectiveness remains mixed at best, while individual targeted aid interventions appear to produce positive results, the impact of aid at the macroeconomic level remains limited. Furthermore, reporting on concrete outcomes of aid interventions remain inadequate, thus perpetuating doubts of aid effectiveness. So, what he is saying is that the actual evaluation of aid, the actual performance of aid is mixed at best. There are certain policies that are very well targeted aid related interventions which seem to work, but the broad general macroeconomic outcome continues to be bleak. Now what does aid mean? What does it entail? So, aid is basically development aid or international official development assistance is defined as those flows to countries and to territories and to multinational development institutes which are provided by official agencies, so that each transaction is administered with a promotion for the promotion of economic development and welfare of developing societies. So, this is your basic sort of definition of development aid. It comes from certain agencies or countries or governments to another set of agencies, governments and officials with the express purpose of administering the process of development in these societies. Now just a sort of overview of how development assistance has increased or you know progressed in different countries. Here there are some examples on the figure to your left you see Afghanistan, Burundi and Burkina Faso where you see that the amount of net aid received by Afghanistan is far more than Burundi and Burkina Faso and it is not hard to see that this process sort of accelerates in 2007-08 and you can think of geopolitical considerations that may be responsible for this change. Now, just to sort of give you a brief overview, in the decade between 1990 and 2000 international developmental aid doubled, right, most of it obviously goes to Sub-Saharan Africa, Asia and Latin America. However, aid per capita more than doubled between 2000 and 2009 in Sub-Saharan Africa. So, just a profile of Africa and how international aid flows have been directed to Africa. Finally, in this overview you can think of how development aid is growing steadily as a growing sort of industry of aid reaching 205 billion US dollars in 2005, the share of the social sector rose from 29% to 52% and debt relief alone almost explains 70% of the increase in ODA. So, those are some of the broad ways in which international aid movements have progressed and some of the new sort of changes that have happened in the international aid flows. Just in general, what role does aid do in the economic development process of a country? Now, the quantity of aid, even though it's increased significantly in the past few years, remains inadequate relative to the financial needs of the countries. Aid, however, is useful in filling the gap between domestic earnings and taxation. You can think of a situation where a poor country, for instance Ghana, has a very low tax base because not a lot of people earn a lot of money and therefore can contribute to the tax basket. Now, you also know that the same poor country may need a lot of government expenditure in hospitals, schools, roads to make sure the quality of life for its people improves but since they have a low tax break, their spending is also constrained. Now, international aid provides a way out of this trap by increasing the government's earnings or increasing the government's kitty to spend on these projects. However, in developing countries, the colonial influence hindered growth of indigenous institutions like good government, better policies, better institutions. Now, in such a scenario, when international aid comes in, it further weakens the government's capacity to generate economic growth by changing bad institutions and establishing good policies and institutions. So, basically, aid can be both good or bad depending on the institutions in a given country, how that aid is channeled, what purpose the aid serves and what that aid is used for. The rest of this presentation would go into details of some of these paradoxes that aid leads to and raise some of the basic questions around the aid economy. I will end this video presentation here but as always, I'll urge you to go through the full PowerPoint to understand the answers of some of the questions and the paradoxes that we have raised here. As always, if you have any questions, feel free to email me.