How is aid supposed to help development of LEDCs?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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In general, aid from organizations like the International Monetary Fund or from individual countries is supposed to help less developed countries by giving them the funds they need to launch programs that are meant to develop their economies.  Some aid is also given to help such countries improve their systems of government.

Many economists believe that good government is needed in order for a country to develop.  The rule of law needs to be respected and there need to be institutions (like honest courts) that will enforce the law.  For that reason, some aid is given for the purpose of developing these institutions that can provide a stable environment for economic growth.

Most aid, however, is meant to directly help with economic development.  For example, rich countries or organizations give money that is meant to fund specific programs.  Aid might be given to help to build a dam or a road.  These infrastructure programs will hopefully help speed development by making it easier for businesses to get power or to transport their goods to market.

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