Many developing countries, especially in Sub-Saharan Africa, receive considerable aid from international donors every year. According to Browne, Sub-Saharan African countries remain the primary recipients of foreign donations globally (540). The question of foreign aid to Africa remains critical in development studies and among intellectuals because of the controversy surrounding its impact on the recipients. Critics suggest that the architecture of foreign aid in Africa represents a saddening picture of billion dollars of foreign aid, which is sent to Sub-Saharan Africa without achieving the development goals. The continent has the poorest countries in the world, and many states are now less developed than they were decades ago (Fischer 857). Although some organizations, such as the United Nations claim that foreign aid achieves its developmental objectives (United Nations University), critics maintain that foreign donations have had disappointing performance regarding economic development and poverty reduction in target countries because recipients fail to use it for the right purpose and donors fail to strictly adhere to aid policies to achieve the objectives, as evidenced in the case of the World Bank.
The Rationale for Foreign Aid
Foreign aid developed in response to the difference between the level of development in the industrialized and the less industrialized countries, such as those in Africa. Scholars are concerned about the role that foreign aid plays in the balance of payments position of countries undergoing late industrialization. The states required financial and technological support because of the high demand to support rapid changes and industrialization. Regardless of the development in other regions, poor and developing countries faced internal and external structural barriers to growth and development, especially chronic external ones, leading to trade deficits that were worsened by insufficient capital flows. The global financial system should operate in a balanced manner, but it becomes impossible because of the inequality in the level of economic development between countries. As a result, structuralists considered foreign aid as the means to support late industrializing states to overcome trade deficits (Fischer 857). Therefore, foreign aid should be used to ensure that the less-developed countries receive the necessary support to improve their developmental outcomes, such as eradication of poverty. Thus, developing countries are the primary recipients of foreign aid, which is offered to assist them in overcoming structural hindrances to develop, such as poverty.
International cooperation focuses on the need to engage all countries around the world in the development agenda by eradicating any form of inequality. Traditionally, many states are left behind because of the different developmental phases and the lack of adequate resource endowment. The concept of foreign aid suggests development cooperation through which the developed countries and global development partners, such as the World Bank and International Monetary Fund (IMF), provide monetary support to the developing countries to address the structural challenges that slow their development, including poverty (Janus et al. 27). The focus on development also relates to the obligation of the rich countries to help the poor to ensure that they all enjoy the benefits of globalization, as well as focusing on relocating a part of the global wealth from the rich to the developing countries that struggle to eradicate poverty and other problems, such as food, sanitation, potable water, primary education, and shelter (Hulme 1). Thus, foreign aid is meant to help the distant poor to eradicate the hindrances to development and assist them in developing and closing the gap between the First World catching up with the developing ones.
How should Foreign Aid be Used?
The developing countries that receive foreign aid should have a clear purpose for its use since in most cases, foreign donations are meant for a specific purpose or program, such as poverty eradication. Historical examples indicate that foreign donor has helped to overcome specific problems in the developing countries, such as eradication of infectious diseases, such as smallpox (Hulme 30). Aid-financed campaigns have been common in many developing countries, especially in Sub-Saharan Africa. For example, whenever a country faces a crisis, such as an infectious disease, the government approaches the international donors, such as the World Health Organization (WHO), for donations to help in fighting the crisis. Evidence supports the claim that if well-used, foreign donations can achieve the intended goal. For instance, insecticide-treated mosquito nets have reduced malaria-related infant mortality rates in the region, and millions of Aids patients are alive today because of the support to access retroviral medicines. The efficacy of the donations emanates from ensuring that donor aid is used for the right purpose.
Foreign aid is effective in supporting developmental goals, but research suggests that it is only effective in countries with proper state institutions and policies, which ensures that such funds are properly used. Burnside and Dollar concluded that foreign aid is channeled to the recipient with a specific objective, such as to help in fighting a disease outbreak (2). Therefore, institutions and policies in the receiving country should be operational to ensure that the funds are channeled to the right programs instead of being misused for irrelevant projects or personal use. Burnside and Dollar suggest a clear interaction between foreign aid and institutional quality in countries that have been effective in the use of the funds (15). Therefore, donors should ascertain that the recipient countries have quality policies and strong institutional accountability to ensure the correct use of foreign aid. Failure to ensure accountability is counterproductive because the donor funds can be misused through compromised systems.
Foreign aid in Africa has failed not because of the vicious circle of poverty, but due to economic and political institutions and policies that block opportunities and incentives to develop. Moyo confirms that such systems hinder the poor from making a better life for themselves regardless of the inflow of donations (31). Governments in the developing countries have failed to provide incentives to their people to develop and overcome poverty because policies related to foreign aid do not work. Therefore, it would be unjust to blame the aid per se in the inability to achieve development in the third world countries, especially in Africa. The only way countries in the region would benefit from the funds is through the development of program objectives and accountable mechanism to ensure that the funds are used for the right purpose and to benefit the right groups, such as the marginalized communities living in poverty. Overall, the donors should ensure that the individuals responsible for the implementation have the best interest of the target population.
The Improper Use of Foreign Aid
In most cases, the foreign aid arrives in the developing countries without proper coordination between the donor and the recipient regarding the sector the funds are going to be used. As a result, a significant lack of accountability when the money reaches the target developing nation affects their potential to help to advance the expected cause. The challenge raises the question of whether the money is used for the intended reason or misused by corrupt political leaders in the receiving state. In the article, Dead Aid, Dambisa Moyo responds to the question by suggesting that foreign aid is easy money that causes more harm than good to the developing country. The fund fosters corruption and damages the economy instead of helping it; hence, it creates a culture of dependence and motivates laziness because instead of enhancing policies that can improve the economy, the recipients can only expectand receive foreign aid (Moyo 29). The author concludes that money is rarely used for the right purpose and causes more damage than the intended good.
The effectiveness of foreign aid is a controversial issue in international affairs, mainly because of improper use. Although some scholars suggest that the problem lies with the donors, a lack of effective policies in the receiving country is another challenge to the proper use of foreign aid (Moyo 30). Corruption is prevalent in many countries receiving the donations, which makes it impossible to use such funds for the intended purpose. As a result, recipients remain unable to develop at the same level as the rest of the world because the funds meant for development are misused by corrupt leaders. Another group argues that the amount of funds provided is inadequate to meet the development needs of the developing nations. Whichever argument is strong, the reality is that the recipients have failed to use foreign aid appropriately to achieve development goals.
Critics of foreign aid have suggested that the flow of aid in Africa has worsened the region, but aid is not responsible for all mistakes that occur in the countries. Clearly, the donor funds are not to blame for the failure to achieve economic development regardless of the increased amount of dollars African countries receive every year. The problem has been the tendency to provide limitless credit lines to governments in the continent without adequate policies to use them to implement and complete successful projects. The donors do not encourage accountability, hence the receiver ends up misusing the funds because they still receive more funds once t the current donations are exhausted. Evidently, governments in the developing countries have failed to learn from their past mistakes, and the continued donations motivate them to look for more, which has also created a culture of dependence on foreign aid. The fact that the funds keeps coming in has made recipients reluctant to use them for the right reason and causes a negative rather than positive impact on the receiving countries.
The Impact of Donor Aid
While foreign aid is intended for developing countries to achieve their development goals faster and efficiently, the purpose is rarely achieved. Researchers indicate that donor aid has not only failed to work but has cause unintended effects because of improper use. Moyo concludes that foreign aid has confounded problems in Africa. The author uses evidence and data that reveals an exponential growth in poverty in countries that have been receiving foreign aid in Sub-Saharan Africa. For instance, in the 1970s, 10% of Africans were living in poverty, a trend that has been increasing, which currently stands at 70%. The figures suggest that approximately 600 million Africans are now living in poverty (Moyo 31). Unfortunately, while many Africans are living in poverty, hundreds of the rich continue to become richer. Although other underlying factors could be behind the economic reality in the region, a critical observation is that most of the developing countries are recipients of foreign aid from the World Bank and other international organizations.
Although Africa remains the highest recipient of of foreign donations, the region has the highest percentage of misused funds. During the early days of donations, the continent experienced a post-independence improvement in per capita income growth but began to experience a decline soon after. The economic performance of the countries in the region does not reflect the level of donor funds that flow into the region (Kanbur 14). Regardless of the continuous massive flow of foreign aid in Sub-Saharan Africa, countries in the region continue to suffer in poverty, with a growing gap between the rich and the poor. For example, a comparison of economic performance between Ghana and Malaysia shows that although four decades ago, the two countries were comparable, Ghana is way behind in terms of achieving the millennium development goals. The difference between the two regions reveals the lack of development in the countries that depend on the donor.
The Impact of Aid Policies
Foreign aid donors, such as the World Bank, have established policies and programs to coordinate and support the provision and use of foreign aid, because donor agencies do not work in a vacuum. The agencies have a coordinated program to ensure that all donation process are conducted in a structured manner (McQuinn 24). Some of the policies operate at the organizational donor level and through the coordination of international donor communities to improve the process and ensure that the benefits of foreign aids reach the right recipients. One such initiative is the official development assistance (ODA), which promotes development cooperation and other policies that support foreign aid. The policy is implemented through the Development Assistance Committee (DAC) to ensure that all donor agencies operate in a coordinated manner to provide donations to the developing countries (Browne 540). However, the policies assume a market-led development trajectory, which has remained ineffective because they do not sanction the countries that misuse the donor funds.
While the policies of the international donors are focused on helping the developing countries to overcome their barriers and develop faster, they are not always used for the purpose. Current literature involves a myriad of motivations behind the provision of foreign aid to developing countries, which supports the observation that the policies of donors are not always effective. The motivations include the self-interest of donors, altruistic motives of donors, and recipient needs, rewarding recipients’ performance on specific indicators, as well as a moral vision in global politics (Janus et al. 27). The observation and research evidence showing a diversity of intentions in providing foreign aid questions the effectiveness of the policies of foreign donors that inform the donations to developing countries. The element of international cooperation challenges the role of foreign donation and the policies of donors, such as the World Bank. Hence, research suggests that countries with positive cooperation with donor organizations could benefit more than those with strained relationships.
Foreign aid policies have been changing over the years, with a serious impact on the receiving countries. For example, foreign aid has changed from the traditional model of providing funds to developing countries to deal with poverty. Instead, they currently take the form of cooperative development (Janus et al. 27). The model demands that the receiving country should initiate programs, such as rural development or poverty eradication initiatives, which the World Bank and other aid agencies come in to finance. Such policies necessitate close cooperation and collaboration between the donor and the recipient. Although the policy reforms reflect changes in the development plan, they have created worse problems for the developing countries. For example, many of the funded projects fail because of the lack of proper monitoring. Donor funds are misused before the completion of the project, which explains the presence of many incomplete development projects in Africa.
Foreign aid under the current donor policies cannot have a positive impact to the receiving countries. The current policies have caused a high level of inequality in the receiving countries and globally. Internally, such policies increase the gap between the rich and the poor, while globally, they have continued to impoverish the developing countries. According to Hulme, contemporary capitalism has generated wealth and income inequalities. The author is convinced that the richest 1% of people around the world will own and control much wealth, while the 99% will continue to live in poverty. Unfortunately, excessive wealth will allow the rich to shape national and international public policies to continue increasing their wealth. The inequality leads to other issues, such as collapsed economies, undermined education and health, exacerbated income poverty, as well as political decline. The developmental challenges affecting developing countries will persist if the current policies are not changed to improve foreign aid and ensure proper use.
Evidently, in its current form and using the existing policies, foreign aid is causing more harm than good to recipients, especially in Sub-Saharan Africa. Stakeholders in the global arena should take action to improve the effectiveness of funding while ensuring its use in achieving inclusive and sustainable development. Adequate donor funds should benefit individuals in the receiving country instead of increasing the gap between the rich and the poor. The donor agencies and international community should collaborate with governments and political leaders in developing policies to ensure that the donations are used for the right purpose (Hulme 30). The use of donations in the developing countries should no longer be left to the market forces because of the risk of abuse by corrupt political leaders. Stakeholders should follow the donations and monitor the progress of intended projects to ensure their successful completion. Since the state and market demands are necessary to achieve sustained economic development, an integrated system will leave no gaps for abuse and misuse of donations.
Even the International Monetary Fund (IMF) acknowledges the potential of a “trickle-down” effect of foreign donations under the current policies. The organization agrees with evidence about the need to change the current economic and social policies around the world. The focus of the donations should not be limited to helping the developing countries without clear structures because of the risk of misuse of funds by corrupt political leaders. Many countries in Sub-Saharan Africa have compromised systems, which creates room for the misuse of the funds. Therefore, change is necessary to use the donations without public “costs.” The new policy should be about redistributing wealth into services, which are a public investment to create sustained economic development. They should also achieve social cohesion and improve welfare for the people in the receiving country. Attempts by the international community and the rich countries should also reduce social exclusion and achieve economic stability, as well as create economic opportunities for everyone. Overall, the change should begin with the current donor policies, which should focus on accountability from the receiving countries.
Foreign aid has always played an essential role in global politics because the funds are intended to promote growth in the developing countries that face structural challenges, such as poverty. The UN is one of the organizations that believe in the effectiveness of foreign aid in its developmental objectives, but critics maintain that foreign donations have worsened the situation for the developing countries because of improper use and ineffective donor policies. As a result, current evidence shows that instead of helping unindustrialized countries to develop, they have worsened their economic situation, such as increasing corruption and widening the gap between the rich and the poor. In many cases, the funds are misused by corrupt political leaders instead of meeting the intended development objective. Therefore, a controversy remains focusing on the actual goal and impact of foreign aid. Considering the possible negative effect, the international community should collaborate with all stakeholders and review the foreign aid agenda to incorporate accountability as the main metric of qualification for foreign aids.
Browne Stephen. ‘Foreign Aid in a Changing World’ in Desai Vandana and Robbert Potter (eds) The Companion to Development Studies, Arnold, 2014
Burnside, Craig, and David Dollar. Aid, Policies, and Growth: Revisiting the Evidence. The World Bank, 2004.
Fischer, Andrew, “Putting Aid in Its Place”. Journal of International Development, vol. 21, 2009, pp. 856-867.
Hulme David, “Why Worry About the Distant Poor?” in Should Rich Nations Help The Poor? Polity, 2016.
Janus, Heiner, Stephan Klingebiel, and Sebastian Paulo. “Beyond aid: A conceptual perspective on the transformation of development cooperation.” Journal of International Development, vol. 27, no.2, 2015, pp. 155-169.
Kanbur, Ravi. ‘Aid, conditionality and debt in Africa’ in Tarp, Finn (ed) Foreign Aid and Development: Lessons Learnt and Directions for the Future, Routledge, 2000
McQuinn Mark, ‘An Overview of Recent Trends in Official Development Assistance: Contradictory New Directions in the Relationship between DAC Donors and China’ in Development and Poverty Reduction: A Global Comparative Perspective, Routledge, 2019.
Moyo, Dambisa, Chapter 3, in Dead Aid: Why Aid is Not Working and How There is Another Way for Africa, Allen Lane, 2009.