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Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses

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  • Ms. Mwanza Nkusu

Abstract

This paper demonstrates that the Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy the aid-induced increased demand. Diagnoses on, and prognoses for, the Dutch disease should take into account country-specific circumstances to avoid ill-advised policies. The paper emphasizes that using public resources inefficiently can be more painful than real exchange rate appreciations, which may not necessarily embody the Dutch disease.

Suggested Citation

  • Ms. Mwanza Nkusu, 2004. "Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses," IMF Working Papers 2004/049, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/049
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    References listed on IDEAS

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