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Tied aid

Updated: Aug 20, 2021

Assistance to other countries, normally less developed countries, which has to be spent on goods and services from the donor. This is contrasted with untied aid, which can be spent in any way. Tied aid may be of less value than untied aid of an equal amount, as tying restricts the choices open to the recipient, though where the recipient imports large quantities from the donor in any case tying may be redundant. As tied aid reduces the possibility that giving aid may cause balance-of-payments problems for the donor, more aid may be available if it is given on a tied basis.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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