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Wednesday, February 2, 2011

Foreign aid declines!

Foreign aid declines by 45.0% during July-December 2010 over the same period of 2009. Here is the news! 

So it's a good or bad sign?

Good sign: (1) Dependency on foreign funds for development spending reduced, reduction in further level of policy prescription from outside.

Bad sign: (1) Increased pressure on budget financing, may guide the government to cut down a few foreign-aided projects; (2) government borrowing from banking sector will increase, so crowding out of private investment as well as inflationary pressures; (3) foreign exchange reserves declines, so pressure on exchange rate depreciation at the time when remittances growth is declining and import payments is increasing.

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