World Bank to Raise Africa Infrastructure Spending

The Standard

World Bank to raise Africa infrastructure spending

Tuesday, June 7, 2005

Reuters

We see from the article that the World Bank is to increase their spending into African infrastructure. Infrastructure is a very important part of the country's economy. From the article, we see a damaged road. This road is used for transport of many goods and also provides transport to people. Therefore there is need for an efficient road.

Good infrastructure will bring about economic growth and also development. Economic growth is the 'increase in an economy's real level of output'. Development is the 'process of improving the lives of people in a country. This involves not only raising living standards i.e. the production of gods and services but the promotion of self esteem, dignity and respect, and the enlarging of people's freedom to choose and to take control of their own lives'.

The World Bank is increasing spending on this infrastructure. This means that it is promoting a type of aid. There are two types of aid, bilateral aid and multilateral aid. Bilateral aid is aid that is provided by individual governments. Multilateral aid is provided internationally by organizations such as The World Bank. This is probably a grant because there is no indication that there will be a form of paying back.

If the infrastructure is improved, there will be an increase in economic growth rate in the long run. This can be illustrated by a diagram such as this.

If the government moves from concentrating of Capital goods and moves down the PPC towards the infrastructure, in the long run where all variables tend to increase, there will be an increase in capital goods which will facilitate an increase in output and eventually cause a growth in the economy. Development is most likely to happen if there is growth in the economy.

It is also noted that a lot of fuel is wasted in evading potholes and there are more mechanical problems with the vehicles which will increase the transport costs by a large margin. If the roads were to be made well, the cost of transport would decrease and the will be a lower cost of production on the side of the producers. Having a lower cost of production, the producers will be encouraged to produce more in the long run after enjoying profits at the same production level and therefore there will be growth in the economy.

If a producer experiences lower production costs, they