1, there is a proposition which that recipient countries view loans, which carry the burden of future repayment, as diffirent from grants. that the prospects of repayment mean loans induce governments to use funds wisely and to mobilize taxes and maintain current levels of revenue collection. whereas grants are viewed as free resources and could therefore perfectly substitute for a governments domestic revenues.then what circumstance lead many donors to push for policy of grants instead of loans to poor contries. Elaborate the underlying reason?
One of the primary reasons why donors may push for grants instead of loans to poor countries is that grants are seen as a more sustainable and equitable form of financial assistance. Loans, although they may come with conditions for repayment, can often burden recipient countries with high levels of debt that they struggle to repay. This can lead to a cycle of debt dependency and economic instability.
In contrast, grants do not need to be repaid, allowing recipient countries to use the funds for development projects without the added pressure of repayment. Grants also encourage greater transparency and accountability in the use of funds, as there is no need to show a return on investment or generate income to repay the funds.
Furthermore, grants are often seen as a more efficient way to address urgent needs in poor countries, as they can be quickly disbursed and have a more immediate impact on poverty alleviation and development. Loans, on the other hand, can be slow to disburse and may require significant administrative and bureaucratic processes.
Overall, donors may push for grants instead of loans to poor countries because they believe that grants can have a more positive and sustainable impact on development outcomes, without creating undue financial burdens on recipient countries.