Aid intensity in Africa

The countries of Sub-Saharan Africa are disproportionately among those receiving the most foreign aid per capita in the world. In this paper we assess the intensity of aid flows to African countries, defined as the size of these flows relative to the categories of economic activity they are designed to support. In the process we provide a critical overview of standard measures of aid and place the flows currently being received by African countries in a cross-country and intertemporal perspective. We draw examples throughout from Botswana, Burkina Faso, Cameroon, Mali, Mozambique, Uganda and Zambia—seven countries whose aid experience spans that of Sub-Saharan Africa and will subsequently be the subject of intensive study.1 Measured relative to recipient GNP, the median value of aid to African countries now stands at nearly 10 times the amount received by Western Europe under the Marshall Plan. While a presumption in favor of fundamental effects on welfare and institutions seems uncontestible, the term “aid intensity” is deliberately neutral. For most of the paper we steer clear of concepts like “aid effectiveness” and “aid dependence” that presuppose a behavioral analysis of the aid relationship. While intensity and effectiveness may be closely related under particular circumstances, the two are clearly distinct. Burnside and Dollar (1996)), for example, find that when countries of disparate institutional and policy environments are pooled together, there is no systematic relationship between the intensity of aid and its effectiveness in raising the recipient’s economic growth rate. Aid dependence is a murkier concept that is often directly conflated with aid intensity, as by the World Bank in its annual World Development Indicators.2 But this ignores the essentially intertemporal nature of dependency while implicitly locating dependency in the recipient rather than the donor. The disparate experiences of countries like Botswana and Uganda bring out a clear distinction between the level and evolution of aid intensity and suggest that case-specific features may overwhelm any mechanical link between the two. We return to these issues at the end of the paper. The Development Assistance Committee (DAC) of the OECD is the main source of comprehensive and internationally comparable data on aid flows. The DAC’s concept of “official development assistance” (ODA) is widely used in international comparisons, and we begin in section 1 with an overview of recent trends in ODA. Section 2 places the ODA measure in a macroeconomic accounting context and discusses its strengths and weaknesses as a measure of aid receipts. With caveats in place, we move on in section 3 to study the resource intensity of aid and its evolution over time. Measuring aid aggregates relative to GNP, population, imports, investment, and government spending, we compare regional medians and rank the case study countries relative to the full sample. Five of the seven case study countries, and by some measures the African median, fall into the upper quartile of aid intensity in the 1990s, a category we identify as “highly aid intensive.” We then observe that a country’s aid ratios can be high in an absolute sense but low relative to what would have been expected given the country’s structural characteristics. We present adjusted rankings that control for population and real income per capita, and speculate about what can be learned from the differences between these and the raw rankings. In section 4 we make a distinction between the resource intensity of aid flows and their transactions intensity. This distinction is central to the HIPC Initiative and further heightens the presumption of high aid intensity in Africa. Section 5 concludes the paper with a summary of our main findings.