Changing Pattern of External Resource Flows ' ft tion for Economic Cooperation and Development (OECD) defines aid as 'official development assistance* which is to fulfil three criteria (Cassen et al: 1994; 2): (a) It has to be undertaken by official agencies; (b) it should have the promotion of economic development and welfare as its main objectives; (c) it should have a 'grant element* of 25% or more. There are two divergent positions (Colman and Nixson: 1994; 184, Cook & Kirkpatrick: 1995; 14-15). On the one hand, there is a two gap model', proposed by Rosenstein-Rodan (1961), Chenery and Bruno (1962), Chenery and Strout (1966), which assumes that economic growth in developing countries may be hampered by the shortage of either domestic savings or foreign exchange. If the domestic savings are not sufficient to enable acquisition of sufficient domestic resources to utilise available domestic savings to be invested, then a 'savings gap* would arise. Similarly, growth in developing countries requires imported materials and machinery since governments are assumed to maximise growth but the foreign exchange to pay for these is hard to come by. That is, if foreign exchange availability is insufficient to permit all the available domestic savings to be invested, then the 'foreign exchange gap* would exist. Hence, programme aid, that focuses on foreign exchange needs, is the logical outcome. On the other hand, Haavelmo (1963), Griffin (1970), Griffin and Enos (1970) have propounded the 'displacement of savings' hypothesis which sees a negative relationship between foreign aid and domestic savings since aid flows could be used to increase consumption, rather than investment. Mavrotas propounds a 'three gap' model by adding fiscal response to savings and foreign exchange gaps. He studied savings displacement hypothesis by applying co-integration and error correction in aid recipient Ghana. He found a strong and positive impact of foreign aid on domestic savings; secondly, the estimate of consumer prices revealed a strong and negative impact on savings, while the growth of income has the expected positive and significant effect on domestic savings (1993: 26, 32-33). He draws three conclusions: (a) aid disaggregation does matter; (b) modelling issues are important; (c) country study provides a better analysis than cross-section study (Mavrotas: 1998; 19). His model of fiscal response remains of limited applicability, since other factors are to be analysed. Nowadays, there is a recognition of the fourth gap—skills, knowledge, technology and management gap—which external resource flow bridges. II. CHANGING PATTERNS OF FOREIGN AID The patterns of foreign aid have been changing in terms of following parameters: (a) donors: who gives aid—bilateral versus multilateral agencies? (b) recipients: who gets aid—countries and regions? (c) types of aid—project, programme, technical assistance. (d) quality of aid—tied or untied.