Economic Growth and International Trade Economic Growth and International Trade Global trade has slowed down in the post-2008 global financial crisis which may adversely impact on the new Sustainable...

Introduction:
In 2000, member states of UN have agreed to achieve 8 major goals for international
development, known as Millennium Developmental Goals. Some MDGs have been exceeded;
some were fall short off but expired in 2015. SDGs are the extension of Millennium
Developmental Goals focusing on improving the conditions of the poor in every country. This is
a unique initiative by UN based on 17 target goals that covers several issues. SDGs are more
expansive and ambitious than Millennium Developmental Goals. International community
largely relied upon foreign aid budgets to meet the target of MDGs but this policy is likely to be
adequate for to meet the proposed target of SDGs. How far the aid is beneficial to poverty
reduction and promotes economic growth is an issue of long standing debate. In the context of
this argument, the concept of aid effectiveness has grown rapidly over last two decades. Though
several theoretical literatures relate the rationale for trade, the experiences for aid related
development is diverse among the developing nations. Time has come to change the funding
models. Aid for trade that put emphasis on the domestic supply constraint plays a crucial role in
achieving the SDGs by the given timeline.
This paper provides a deep insight how foreign aid and aid for trade can address the
Development target of 2030 or at least some of the specific goals of SDGs. This paper also
examines how aid for trade can best help to achieve 2030 sustainable developmental Goals.
SDGs have a broader focus than MDGs that requires multidimensionality into policy design.
Foreign aid is crucial in the era of SDGs:
While all countries will strive to achieve the goals by 2030, some countries are well equipped
than others. It has been estimated that $30 billion per year is required to eradicate global hunger
and $6 billion per year to mitigate the problem of extreme poverty. Thus foreign aid is very
much important in achieving the goals of SDGs.
Foreign aid plays a more crucial role in the era of sustainable Developmental Goals. As our
world faces multiple intersecting crises, from extreme poverty to income inequality, from climate
change to unpredicted natural calamity, the role of foreign aid is crucial. The need will be more
in dealing with the current crisis, as stated by Winnie Byanyima , Oxfam International Executive
Director. Today there ae various new source of funding for development like private investment
and mobilization of tax revenue but still aid plays an important role as believed by Oxfam.
Actually private finance is driven by market forces thus largely targets the richer developing
countries. Private finance, in other words, plays a different role and purpose from aid. Aid will
remain a larger component of developmental finance flow including private investment.
According to Oxfam, aid plays an important role to ensure that all nations even the poorest can
achieve SDGs. (International 2016)
Aid effectiveness matters:
Aid effectiveness implies to ensure that aid helps in developing countries to improve the welfare
of poorest people. It must genuinely focus on the developmental priorities of poorest nations.
Sometimes aid is driven more by politics than by need thereby undermines its effectiveness. In
case of donor driven aid program, citizens stop demanded adequate service and facilities from
their own government rather look forward to aid. Governments also become more accountable to
the donors, not to their citizens. The foreign aid can only be well used only if donors and local
government work together in taking decisions on country’s development strategy considering
the all the relevant aspects of development. In order to make the development sustainable in the
long run, governments must exercise the effective ownership over the developmental process.
At the bottom line, according to the economic concept of efficiency, aid is the scarce resource
and must be used to the countries that need it most. (OECD n.d.)
Foreign aid hurts Sub Saharan Africa:
Foreign aid is the integral part of Africa’s development program. Several NHOs and
international organizations are putting tireless efforts in handing out food and drinking water,
help to fight against natural calamities, providing teachers and training – trying to make the
world a better place to live in. But in has been argued that foreign aid has made little progress to
alleviate poverty at least in Sub Saharan Africa, home of bottom million poor people. Empirical
evidence has found that large influx of foreign aid can do more harm than to alleviate poverty.
For example, in countries like Chad, Angola and Nigeria the level of progress is appeared to be
very low despite the receipt of huge foreign aid. As a whole the continent itself receives $ 50
billion of international assistance annually. Instead of improving the living standards of 600
million of poor in the region, this massive foreign aid ultimately makes the rich richer and poor
poorer, acts as the catalyst to the vicious cycle of corruption and hinders economic growth at the
end. The data for foreign aid and economic growth provides clear signs that as aid increases,
GDP growth declines.
http://www.lejournalinternational.fr/Foreign-aid-is-hurting-not-helping-Sub-Saharan-
Africa_a2085.html
Foreign aid strengthens the corruption particularly in Sub Saharan African countries where
corruption was already a huge concern. Instead of helping the people who are really in need,
foreign aid reinforces the resources to the elite group of the society thereby contributing more to
increase the economic disparity between the rich and the poor. A positive correlation is observed
between the influx of foreign assistance and the statistically significant increase in corruption.
The money is not spent on promoting economic growth or helping the poor rather it is used for
some dishonest procurements. Another major problem is related to heavy dependence of aid.
From the very primary stage of its development, these countries are used to be aid dependent
thus put no efforts to improve their local business .They have free money at their disposal and
they take it granted for several years. (LYONS 2014)
Effective aid management: A case for Botswana
During the time of its independence in 1966, Botswana was one of the poorest countries in the
world and solely depends on grant-in –aid from Britain for its developmental spending. It is one
of the high recipients of foreign aid- since independence it has received extensive bilateral and
multilateral foreign aid. But in the subsequent years, it has become one of the highest growing
countries in the world. Botswana was very rich in diamond resource thus natural resource
contributes a considerable share of economic growth. Foreign aid also plays an important role as
government effectively uses the foreign aid to develop the economic and social infrastructure
and diversify their economy. While many of African nations...