Papers Published
Abstract:
How beneficial is foreign aid? This is a fairly simple
question in an undistorted economy. In a highly distorted
economy like the Sudan sorting out the interaction of
foreign aid with the distortions is important. How the
foreign aid ultimately affects economic welfare (the shadow
price of foreign aid) depends on what policies are used to
obtain international and fiscal balance. Moreover, the
granting of foreign aid is often conditional upon economic
reform of various sorts; part of a foreign aid package may
be in kind. Evaluation of such a foreign aid package
requires determination of the marginal social value of the
accompanying reforms as well as the shadow price of the
foreign exchange and commodities included in the foreign
aid package. This paper develops a simple four sector
linearized general equilibrium model of the Sudan in order
to perform the requisite cost benefit analysis. It finds
that the spfa depends strongly on how the fiscal authority
adjusts to the foreign aid, the economic reforms required,
and the form taken by the aid.