Foreign aid is the transfer of goods, capital or services from one country to another directly or indirectly through international organizations such as the World Bank, the United Nations Children’s Fund, and many others. It is meant to offer some benefits or help to the recipient country and it comes in several forms for example; military, emergency humanitarian or economic aid. It is aimed at providing help in terms of crisis or disaster. This essay will discuss the concept of foreign aid. It will then explain the different types of foreign aid and therein discuss its advantages and disadvantages.
Finally it will bring to the fore, a soluble (find suitable word) conclusion. Today African countries are more dependent on foreign aid than they have ever been. There are three different types of aid given to these needy countries and these are: Official Development Assistance (ODA), humanitarian or emergency and Military aid. ODA is the most common aid donated to Africa and it is more powerful economically than the other two. This particular aid that comes to Africa is donated by the G8 countries (the eight nations that account for roughly two-third of the global economy).
Foreign aid was introduced during the 1950’s in order to create economic growth and promote democracy in African countries and it also refers to aid from national governments for humanitarian purposes and for promoting welfare in low and middle income countries. ODA can be bilateral; which refers to government to government transfers or multilateral which is from institutions such as the World Bank or UNICEF that pool aid from one or more sources and disperses it among many recipients. This aid is given as either grants, where no repayment is required, or concessional loans, where interest rates are lower than market rates.
Loan repayments to multilateral institutions are pooled and redistributed as new loans. Emergency aid or Humanitarian aid is rapid assistance given to people in immediate distress by governments, organizations, or individuals to relieve suffering, during and after emergencies like wars and natural disasters. The term often carries an international connotation, but this is not always the case. It is often distinguished from development aid by being focused on relieving suffering caused by natural disaster or conflict, rather than removing the root causes of poverty or vulnerability.
The provision of humanitarian aid or humanitarian response consists of the provision of vital services such as food aid to prevent starvation by aid agencies, and the provision of funding or in-kind services like logistics or transport, usually through aid agencies or the government of the affected country. Military aid is aid which is used to assist a country or it’s people in its defense efforts, or to assist a poor country in maintaining control over its own territory. Many countries receive military aid to help with counter-insurgency efforts. Military aid can also be given to a rebellion to help fight another country.
This aid may be given in the form of money for foreign militaries to buy weapons and equipment from the donor country. Foreign economic assistance is very important for economic development of African countries and comes with a number of advantages; the first one being that it helps most African countries that have low per capita income. The low per capita income is due to low national income and poverty, making the rate of savings very low. Low savings rate cannot help in capital formation and economic development. Similarly imports are greater than exports and therefore there is always a deficit in balance of payments.
Foreign aid in the form of loans comes in to bridge these domestic savings gaps and also helps in overcoming the balance of payments problem. Another advantage of foreign aid is that the development requirements are met; Adjusting countries in Africa want to develop their agriculture, industry, power and natural resources but due to lack of foreign exchange, required technology could not be imported. Foreign aid and loan facilities help Governments to import the required technology and basic raw material with which different sectors of the economy can develop and production is also enhanced due to utilization of modern machines.
Foreign aid therefore increases productivity of various sectors of the receiving African countries. Foreign aid also helps in the establishment of modern economic and social infrastructure for the receiving Adjusting countries in Africa; the economies of these African countries cannot grow without the presence of economic infrastructure; availability of gas, power, transport and communication. Similarly social infrastructure; education, training and health facilities, is also essential.
These infrastructure facilities require local and foreign capital, which is very limited in these countries. Foreign aid helps governments to establish these infrastructures. When construction and other development activities are started, they generate employment opportunities for the people. This foreign aid has another advantage of Meeting Emergencies; it helps Adjusting countries in Africa in emergencies; whenever there is a flood or some other natural calamity, Food Aid program provides these countries with different types of food items such as wheat, dry milk and so on.
Although foreign aid has great advantages, it also has disadvantages as most of it comes with negative conditionalities as discussed here; a major proportion of aid from donor nations is tied, mandating that a receiving nation spends on products and expertise originating only from the donor country. For example United States of America (USA) law, backed by strong farm interests, requires that food aid be spent on buying food at home, instead of where the hungry live, and as a result, half of the aid amount is used on transporting the aid to the receiving country. As a result, the tying is estimated to increase the cost of aid by 15–30%.
Foreign aid has unfortunately been more harmful to the African countries’ economies and political systems than helpful. This is because if we take a look back at Africa before foreign aid and compare it to today’s Africa, we Africans were better off before foreign aid. After the introduction of foreign aid, our economies have not improved and our standards of living have not been enhanced. An assessment of the impact of foreign aid reveals that for two decades African countries have received more foreign aid than any other continent yet the number of Africans that live under the poverty line (less than one dollar a day) has increased.
For 60 years one trillion dollars of foreign aid in the form of Official development assistance came to Africa, even more astonishingly 400 billion dollars of ODA was transferred to Africa between the years 1970 to 2000 yet we Africans are in need of help more than ever (Powell,2005). Another disadvantage is that foreign aid in Africa discourages investment and entrepreneurship. The economies of most African countries are tied to agriculture and mineral wealth with the exceptions of a few countries such as South Africa, Nigeria, and Angola which rely on oil production.
In Western African countries such as Ghana and Senegal, cocoa beans and peanuts are major cash crops while diamond, copper, and gold are found in the Democratic Republic of Congo, Zambia, and other countries. Africa has countless resources to enhance its economy and improve the standard of living of its people, but that wouldn’t happen unless foreign aid is stopped. For example agricultural aid to Africa harms African farmers who are capable of producing more than enough food for all Africans.
It puts them out of business because no one would buy their crop for the right price when the can get free or subsidized food. For example Zimbabwean farmers cannot grow grain because they receive a large amount of free or subsidized grain from the West. Agriculture is where Africa should be enormously successful but it is not, because of agricultural aid from America and Western countries. Free or subsidized food from the West undermines the economic viability of farming in Africa. Why should African people depend on African farmers when they can get free or subsidized food?
In the Cato Institute study called “The false promise of Gleneagles” the author, Mariam Tupy, shows that agricultural aid is more harmful to Africans than helpful. Organization for Economic Cooperation and Development estimate that western agricultural aid to Africa totalleds $365 billion in 2007. (Tupy, 2009) It should be noted that not only does Aid harm the economy but it also harms the health of the African people. The food donated by the US and the western countries are genetically modified which are harmful to our health.
In 2002 the UN’s world food program gave thousands of tons of genetically modified food donated by G8 countries to aid Zambians that were hit by severe drought but instead of the food saving the starving people it killed more than it saved. Why should Africa eat genetically modified food which is not good neither for our health nor for our economies? Another problem foreign aid creates in Africa is that it aids dictatorship; making some African presidents last more than 20 years or so regardless of whether the government holds official elections or not.
Foreign aid encourages dictatorship and helps dictators stay in power for a very long time. At least thirteen African sitting leaders dominated or continue to govern their struggling nations for more than two decades. An example of such leaders is Robert Mugabe who has led Zimbabwe for over three decades or Omar al Bashir of Sudan who was in power since 1989 and is wanted by the International Criminal Court for crimes against humanity. A classic Example of how aid helps dictators stay in power is the United States of America’s Aid to Egypt.
The U. S has given Egypt tens of thousands of Billions in Aid for over thirty years. During these thirty years Mubarak (former Egyptian President) used this money to stay in power. This money helped Mubarak build one of the strongest armies in that region and oppressed his people. Without Foreign aid these dictators wouldn’t last one day because they wouldn’t have the means to build an army that they use in order to stay in power and oppress their people. Foreign aid is also harmful to the countries that donate.
At the moment there is an economic crisis in the world and therefore some of the donor countries cannot afford to donate while their own people are suffering; the wellbeing of their people must come first. For example, in the United States, millions of people are jobless and the unemployment rate is higher than ever, higher than during the great depression. In my view, it would be unfair to donate billions of money to other countries when their families at home are becoming homeless mostly by losing their houses to credit loan companies. Lastly, even if aid is helpful it should be temporary and not permanent.
After almost forty years of existence, foreign aid has become something of permanence. Even more worsening is that to some African countries, foreign aid has become a considerable force in the national economy, forcing such countries to become completely dependent on it. A study done by Andrew Mwenda who is the political editor of the daily Monitor, Ugandan Newspaper reported that 50 percent of the Ugandan budget comes from foreign aid and the government spends 11 percent of its budget on the military and about 20 percent or $40 million dollars of its budget is lost to corruption.
(Mwenda, Foreign Aid and the weakening of Democracy Accountability in Uganda). Africa has to plan for the longer and not the near future because it cannot depend on foreign aid forever. In order for this to happen, foreign aid has to be cut from Africa, if not the donor countries should at least set a time limit on foreign aid. In conclusion, as much as foreign aid is not completely bad, it must have long-term benefits for Adjusting African countries otherwise, it is only a question of time and developed countries will not be able to sustain the growing number of people in Africa, through aid.
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1 Dec. 2012 Powell, Benjamin. “Africa Needs Investment, Not Aid. ” Africa Needs Investment, Not Aid (2005): 1-4. Web. 16 Feb. 2012. Journal Article. Tupy, Marian. “Free Trade Would Help Africa. ” Free Trade Would Help Africa 557 (2055): 1-5. Web. 21 Feb. 2012. Journal Article Tupy, Marian. “The False Promise of Gleneagles: | Marian L. Tupy | Cato Institute: Development Policy Analysis. ” The False Promise of Gleneagles: | Marian L. Tupy | Cato Institute: Development Policy Analysis. Washington, DC : Cato Institute, Center for Global Liberty and Prosperity, n. d. Web. 20 Nov. 2012.