The Effectiveness of Foreign Aid in Developing Countries: An Exploratory Review
Edmore Mahembe and
Nicholas Odhiambo ()
No 25342, Working Papers from University of South Africa, Department of Economics
The aim of this paper is to examine whether official development assistance (ODA) or foreignaid has made developing countries worse off as alleged by a number of aid critics. ODAdisbursement to developing countries increased almost five-fold; from around US$36 billionin 1960 to US$176 billion in 2016. The study found that between the period 1970 and 2017: (i)a total of 17 countries have been added to the ODA list, (ii) 60 countries have graduated fromthe list, mainly due of increases in their per capita incomes; (iii) out of these 60 graduates, 45graduated between 1991 and 2018; and (iv) it is projected that another 24 countries andterritories will graduate by 2030. This suggest that, overall, a number of countries haveprospered over the years, and have therefore not been made worse by foreign aid. Globalpoverty, represented by headcount poverty rates (at US$1.90 a day) have been decreasingconsiderably from around 44 percent in 1981 to less than 10 percent in 2015.
Keywords: Effectiveness of foreign aid; aid effectiveness literature (AET); graduation from official development assistancee(ODA); developing countries; millenium development goals (MDGs); sustainable development goals (SDG); povery reduction (search for similar items in EconPapers)
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