ABSTRACT
What is tying? External financial assistance to developing countries is provided in a wide variety of forms. This is largely a matter of the degree of restriction placed by the provider of the finance on the use to which these resources should be put and the sources from which they should be obtained. At one extreme is completely untied finance which the recipient can use for any purpose and which can be used to procure goods and services from any international source. At the other extremes would be finance tied to procurement of goods in the assisting country and tied to use on a specific project (or for specific goods) in the recipient country. There are a variety of intermediate forms. In practice the forms of aid will vary greatly for different countries but there has been a general trend towards increased ‘sourcetying’ of aid since 1960.
