ABSTRACT
One suggestion for reducing these heterogeneous categories to a common measure is to define aid as the real cost or sacrifice to the countries providing the nominal flows of resources. This would give aid an economic meaning. The real cost or ‘grant element’ in a loan would be measured by the difference between its nominal value and the future interest payments and amortization discounted at a rate which reflects the return on the funds alternatively open to the country supplying them. In the case of a grant the cost would obviously be identical with its nominal value.
