Possible effects of refusal of foreign aid for the Republic of Moldova

Abstract

Today, a large number of low-income and middle-income countries recourse to foreign financial aid in order to develop economically and socially, but not all of them comply with the requirements for being eligible to receive this financial aid. In such direction, aid conditionality as one of the elements and mechanisms of the lending process raised many questions about its concept and especially its effects (more positive or more negative). However, it is still considered to be one of the best monitoring instruments used by the international financial bodies to enhance the economic and social development of the recipient countries, despite the fact that this influence has many negative impacts. The research outlines the next points like: historical background, premises and conditions of foreign aid appearance, breaking down what does foreign aid represents nowadays, its types and purposes, noble effects and criticism. In the same time, there are revealed the benefits and constrains under the both sides of investing parties and the Republic of Moldova (recipient country) under the concrete deals, facts and examples of effects of aid from USA government and European Union support programs. Further, we make evident some main possible effects in case of refusal of foreign aid through the eyes of the Republic of Moldova. Finally, we draw some conclusions after having done given research. All the conclusions are linked to the ideas that (1) external grants and loans account for 18% in the structure of national public budget of Moldova; (2) the image of the country may be affected dramatically; and (3) political and Economic aspects of the dilemma. JEL: E61, E66, F02, F35, F53, F62, H11, H63, O23, P35.