Glossary
Accountability
Ability to explain or provide rationale for one's actions.
Accrual Accounting
Recording transactions or events at the time economic value is created, transformed, exchanged, transferred, or extinguished.
Accumulation of Capital
Using investment to build capital assets.
Aggregate Demand
The total level of demand for all goods and services in an economy. It is inversely related to the price level and is derived from the interaction between the goods markets and the money markets.
Aggregate Supply
The total supply of goods and services in an economy. In the long run, the Aggregate Supply is the natural level of output of the economy, or the real value of output determined by the levels of labor and capital in the economy irrespective of price level.
AIDS
Acquired Immune Deficiency Syndrome
Appreciation
An appreciation of the exchange rate is an increase in the value of domestic currency in relation to foreign currency.
Appropriations
This refers to an authority under a law given by the legislature to the executive to spend public funds for a specified purpose. Annual appropriations are made through annual budget laws. Supplementary budgets/appropriations are sometimes granted subsequent to the annual law if the annual appropriation is insufficient to meet the purpose.
Balance of Payments
The BOP is a measure of all foreign currency coming into and going out of a country with inflows measured as positive and outflows as negative. It has two primary components, the Current Account, which reflects the trade balance of a country, and the Financial Account, which reflects the balance of investment flows into and out of a country. It is a key determinant of exchange rates in that inflows of foreign currency lead to a domestic appreciation of the currency and outflows lead to a depreciation of the currency.
Balance of Trade
That part of a nation's balance of payments dealing with imports and exports, that is trade in goods and services, over a given period.
Bilateral aid
This refers to aid provided on a country-to-country basis. Bilateral aid is provided to developing countries, as well as to institutions working in fields related to these countries.
Bretton Woods Institutions
A term used to describe the World Bank and International Monetary Fund; founded in 1944 at Bretton Woods, New Hampshire, USA.
Budget Balance
The budget balance is the difference between these revenues and expenditures. A negative budget balance is a fiscal deficit and a positive budget balance is a fiscal surplus.
Capital (capital assets)
A stock of wealth used to produce goods and services. Capital is usually divided into physical capital (also called produced assets), natural capital, and human capital.
Cash Accounting
Cash accounting systems recognize transactions and events when csh is received or paid.
Central Government
All government units that are agencies or instruments of the central authority of a country and that are covered by or financed through the budget or extrabudgetary funds at that level.
Civil Society Organisation (CSO)
Civil society generally refers to non-government and non-commercial entities. Organizations within civil society include church groups, environmental pressure groups, local credit collectives, and trade unions.
Commitments (budget)
In accounting usage, commitments refer to a stage in the expenditure process at which contracts or other forms of agreement are entered into, generally for future delivery of goods or services. A liability will not be recognized until delivery of the item, but the government is contractually committed to meeting the obligation once delivery is made.
Comparative Advantage
The concept, formulated by British economist David Ricardo, according to which economic agents -- people, firms, countries -- are most efficient when they do the things that they are best at doing. Comparative markets, where countries benefit most by producing and exporting goods and services that they can produce more efficiently (at a lower cost, by using less physical, human, and natural capital) than other goods and services
Concessional Loan
This refers to loans provided to poorest countries with lower interest rates and longer repayment periods than standard market loans. Also known as "soft loans".
Conditionality
Economic policies or structural reforms that are used as performance benchmarks by institutions extending loans to developing countries. Also known as performance criteria or benchmarks.
Cross Conditionality
Practice of including conditionality required by other institutions (usually the World Bank and IMF) in loan agreements with developing countries.
Currency Appreciation
An increase in the value of one currency relative to another currency. In other words, a unit of one currency buys more units of another currency.
Currency Depreciation
A decline in the value of one currency relative to another currency. In other words, a unit of one currency buys fewer units of another currency.
Currency Devaluation
A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.
Currency Revaluation
A deliberate upward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.
Current Account
The current account measures the foreign currency inflows and outflows due to trade in goods and services.
Debt Relief
Debt relief may take the form of cancellation or rescheduling. Debt cancellation (or Retrospective Terms Adjustment) provides unconditional relief from the burden of repaying both the principal and interest on past loans. Debt rescheduling is a form of relief by which the dates on which principal or interest payments are due are delayed or rearranged to reduce annual debt service requirements.
Debt Service
This refers to periodic repayments due under debt contracts. This includes payment of interest as it becomes due and payments of the original amount borrowed (principal).
Depreciation
A depreciation of the exchange rate is a decrease in the value of domestic currency in relation to foreign currency.
Development Assistance Committee (DAC)
This committee within the OECD provides a forum for consultation among the 21 donor countries on how to increase the level and effectiveness of aid flows to recipient countries.
Economic Development
Qualitative change and restructuring in a country's economy in connection with technological and social progress. Main indicators of economic development are increasing economic productivity and average material wellbeing of a country's population.
Economic Growth
Quantitative change or expansion in a country's economy. Economic growth is conventionally measured as the percentage increase in gross domestic product (GDP) during one year.
Empowerment
The conferment of a sense of self-actualization or authority to an individual, group of individuals or an organization.
Exchange Rate
The exchange rate is the ratio of domestic currency needed to purchase one unit of foreign currency. In real terms the exchange rate is the ratio of domestic goods per unit of foreign goods.
Financial Account
The financial account measures the foreign currency inflows and outflows due to investment activity.
Fiscal
(see Budget Balance)
Fiscal Indicator
Fiscal indicators include government revenues such as taxes and government expenditures such as general government spending, defense spending, government investment in infrastructure and other types of capital and interest payments on government debt. The budget balance is the difference between these revenues and expenditures.
Fiscal Policy
This refers to a government's decisions about the amount of money it spends and collects in taxes to achieve pre-determined national development and security goals.
Fiscal Surplus
(see Budget Balance)
Foreign Direct Investment (FDI)
This refers to external investment that establishes a long-term interest in or effective management control over an enterprise. Foreign direct investment can include buying shares of an enterprise in another country, reinvesting earnings of a foreign-owned enterprise in the country where it is located, and parent firms extending loans to their foreign affiliates.
G-24
Group of 24 countries formed at Lima in 1972 to represent the interests of the developing countries in negotiations on international monetary matters.
G7/G8
The G7 Group of major industrialized democracies (created in Denver in 1997) comprises Canada, France, Germany, Italy, Japan, the UK and the United States. The Group of Eight (G8) includes Russia. Their Heads of Government meet annually at the G7/G8 Summit to discuss areas of global concern.
G-77
Group established in June 1964 by 77 developing countries to promote the collective economic interests of its members and enhances their joint negotiating capacity on major economic issues.
Globalization
The growing independence and interconnectedness of the modern world through increased flows of goods, services, capital, people and information.
Government Debt
The total amount that a government owes to domestic and foreign lenders.
Grant Element
Measures the concessionality of a loan expressed as the percentage by which the present value of the expected stream of repayments falls short of the repayments that would have been generated at a given reference rate of interest (usually market rate).
Gross Domestic Product (GDP)
GDP is a measure of the total income earned domestically in a country. It can be measured nominally (using current price levels) or in real terms (using a constant price level in order to correct for inflation when comparing GDP over time).
Gross Domestic Saving Rate
Gross domestic product (GDP) minus consumption by government and the private sector, expressed as a percentage of GDP.
Gross National Income
Also known as Gross National Product, it comprises the total value of goods and services produced within a country (i.e. its Gross Domestic Product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries.
Heavily Indebted Poor Countries (HIPC) Initiative
An initiative launched by the International Monetary Fund and the World Bank in 1996 to provide multilateral, bilateral and private sector debt relief to the poorest countries. Revised in 1999 to deliver twice as much debt relief as the original initiative.
HIV
Human Immunodeficiency Virus.
Human Capital
This refers to people's innate abilities and talents plus their knowledge, skills, and experience that make them economically productive. Human capital can be increased by investing in health care, education, and job training.
Human Development Index (HDI)
A composite of several social indicators that is useful for broad cross-country comparisons even though it yields little specific information about each country. First used in the United Nations Development Programme's Human Development Report 1990.
Humanitarian Assistance
Humanitarian Assistance comprises disaster relief, food aid, refugee relief and disaster preparedness; geared towards saving and preserving lives during emergency situations and in the immediate post-emergency phase.
Income Groups
The classification of countries according to per capita Gross National Income (GNI). The World Bank's 2005 World Development Indicators, provides the following thresholds: low income group (less than $765); lower middle income group ($766 to $3,035); upper middle income group ($3,036 to $9,386); high income group (above $9,386).
Industrialization
The phase of a country's economic development in which industry grows faster than agriculture and gradually comes to play the leading role in the economy.
Inflation
An increase in the overall price level.
International Financial Insitutions (IFIs)
Generic name given to all financial institutions operating on an international level, ranging from development banks, such as the World Bank and African Development Bank (ADB), and monetary authorities, such as the IMF.
International Monetary Fund (IMF)
An international institution founding in 1944 -- together with the World Bank -- to promote international monetary cooperation and facilitate balanced growth of trade by encouraging the removal of foreign exchange restrictions, promoting exchange rate stability, and expediting payments among member countries.
Macroeconomics
The study of economics in terms of whole systems with reference to general levels of output and income and to the interrelations among sectors of the economy.
Market Liberalization
Removing and abstaining from using state controls that impede the normal functioning of a market economy - for example, lifting price and wage controls and import quotas or lowering taxes and import tariffs. Market liberalization usually does not mean that a government completely abstains from interfering with market processes.
Microeconomics
The study of economics in terms of individual areas of activity (as a firm, household, or prices).
Millennium Development Goals
A set of eight international development goals for 2015, adopted by the international community in the UN Millennium Declaration in September 2000.
Monetary Policy
The regulation, by the central bank, of the money supply in order to maximize production and employment and stabilize prices.
Money Supply
The money supply is a measure of the assets available for use in transactions.
Moral Hazard
The possibility that the signal or expectation of possible future government support may induce an undesirable change in behavior by management of an enterprise or bank, for example by engaging in more risky activities because some of the potential losses are seen as being effectively underwritten by the government.
Multilateral Aid
Aid channeled through international bodies for use in or on behalf of aid recipient countries.
Multilateral Institution
An international institution with governmental membership, spanning several regions, including financial institutions such as the World Bank and IMF, UN agencies and regional groupings.
Natural Capital
A stock of natural resources -- such as land, water, and minerals -- used for production. Can be either renewable or nonrenewable.
Natural Monopoly
A situation that occurs when one firm in an industry can serve the entire market at a lower cost than would be possible if the industry were composed of many smaller firms. Electricity and water utilities are two classic examples of natural monopolies. These monopolies must not be left to operate freely; if they are, they can increase prices and profits by restricting their output. Governments prevent such a scenario by regulating utility monopolies or providing utility services themselves.
Nominal GDP
(See GDP)
Non Governmental Organizations (NGOs)
These are private non-profit making bodies which are active in development work. They are usually registered charities.
Official Development Assistance (ODA)
Official development assistance is defined as those flows to developing countries and multilateral institutions provided by official agencies or by their executive agencies, which meet the following tests: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective; and b) it is concessional in character and conveys a grant element of at least 25%.
Outputs and Outcomes
In performance assessment in government, outputs are defined as the goods or services produced by government agencies (e.g.: teaching hours delivered, welfare benefits assessed and paid); outcomes are defined as the impacts on social, economic, or other indicators arising from the delivery of outputs (e.g.: student learning, social equity).
Paris Club
Informal association of credit country finance ministers and Central Bankers which meets to negotiate bilateral debt rescheduling agreements with indebted country governments.
Physical Capital (produced assets)
Buildings, machines, and technical equipment used in production plus inventories of raw materials, half-finished goods, and finished goods.
Poverty Reduction Strategies
Poverty Reduction Strategies are prepared by developing country governments in collaboration with multilateral institutions, civil society and development partners. These documents describe the country's macroeconomic, structural and social policies and programs to promote growth and reduce poverty. They also specify financing needsand major sources of financing required to achieve poverty reduction goals.
Primary Goods
Goods that are sold (for consumption or production) just as they were found in nature. Include oil, coal, iron, and agricultural products like wheat or cotton. Also called commodities.
Production Resources
The three factors of production: labor, land, and capital (physical, human, and natural capital).
Protection, Protectionism
The imposition of import tariffs, import quotas, or other barriers that restrict the flow of imports. The opposite of "free trade."
Quasi-Fiscal Activities
Activities (under the direction of government) of central banks, public financial institutions, and nonfinancial public enterprises, which in principle, can be duplicated by specific fiscal measures, such as taxes, subsidies or other direct expenditures. Examples include subsidized bank credit and noncommercial public services provided by an enterprise.
Real GDP
Seigniorage Revenue raised by the printing/creation of money.
Security Sector
The security sector is defined as those who are, or should be, responsible for protecting the state and communities within the state. This includes military, paramilitary, intelligence and police services as well as those civilian structures responsible for oversight and control of the security forces and for the administration of justice.
Seigniorage
The profit which results from the difference between the cost of making coins and currency and the exchange value of coin and currency in the market.
Social Capital
This refers to the institutions relationships attitudes and values that govern interactions among people in society and contribute to economic and social development.
Social Safety Net
This refers to public sector measures to protect the poor and vulnerable including public work schemes, unemployment benefits, food securities, (etc.).
Structural Adjustment Loans
Loans made by some multilateral institutions to developing countries which may carry strict financial and budgetary obligations or required reforms intended to open recipient countries to private investment and increase the recipient's competitiveness in the global economy. Reforms are usually oriented towards liberalization, privatization and reduction in government expenditure.
Sustainable Development
Sustainable development encompasses economic, environmental, and social sustainability, which can be achieved by rationally managing physical, natural, and human capital.
Technical Co-Operation/Technical Assistance
This refers to the provision of advice and/or skills, in the form of specialist personnel, training and scholarship, grants for research and associated costs.
Terms of Trade
The ratio of export prices to import prices. A high ratio benefits an economy, because then the country can pay for many imports by selling a small amount of exports. If terms of trade worsen, the country needs to sell more exports to buy the same amount of imports.
Tied Aid
The practice of most donors to insist that aid is spent on goods and services from the donor country; in effect, restricting access to those who can compete best on price, quality and service.
Trade Deficit
The amount by which merchandise imports exceed merchandise exports.
Unemployment Rate
The percentage of the labor force that is unemployed and actively seeking a job.
Utility
Utility theory explains consumer tastes and preferences. Consumers purchase those things that give them satisfaction or utility.
World Bank
The term World Bank is commonly used to refer to the International Bank for Reconstruction and Development and the International Development Association. Three other agencies are also part of the World Bank, the International Finance Corporation, the Multilateral Investment Disputes. Together these organizations are referred to as the World Bank Group. These institutions aim to reduce poverty and improve people's lives by strengthening economies and promoting sustainable development.
