Aid was, and is, used by governments and big multilateral aid agencies to ensure that the governments that receive it adopt policies that favour not just capitalism in general, but the interests of their private corporations and banks in particular.

reliance By supporting economic growth in developing countries, USAID helps create better, stronger and more resilient markets for U.S. exports. In addition, USAID programs benefit supply chains of strategic importance to specific U.S. industries that rely on key imports from developing countries for their production.

Providing aid stimulates the growth of the world economy along with promoting economic development within the region. It can help with market expansion. Providing aid to a country could mean the expansion of goods and resources that can be shared between the two countries.

When recipient nations are required to spend aid on products from the donor nation, project costs can be raised by up to 30 percent. Tied aid can create distortions in the market and impede the recipient country’s ability to spend the aid they receive.

Tied aid decreases value for money provided by the aid. Tied aid undermines the recipient country’s ownership of the development process. Tied aid is criticized as preventing developing countries from taking full responsibility of their own development in utilizing the aid.

For example, China’s “tied aid” for infrastructure usually favors Chinese companies (especially state-owned enterprises), while its loans are in many cases backed by African natural resources. Much Chinese financing to Africa is associated with securing the continent’s natural resources.

The report notes that about 99 percent of the $3.6 billion in aid that should be untied under the recommendation but remains tied falls to certain sectors — primarily health, government, and civil society, which each made up about 22 percent.

Untied Aid is assistance given to developing countries which can be used to purchase goods and services in virtually all countries. It is contrasted with tied aid which stipulates that goods and services bought with it can only be purchased from the donor country or from a limited selection of countries.

Aid flows consist largely of three types: (i) project aid, (ii) programme aid (including commodity aid, which has largely been food aid), and (iii) technical assistance. Project aid is often seen as the standard aid package.