IDEAS home Printed from https://ideas.repec.org/p/ocp/rpaeco/pb_45-22.html
   My bibliography  Save this paper

The Sovereignty of Developing Countries: The Challenge of Foreign Aid

Author

Listed:
  • Noamane Cherkaoui

Abstract

Foreign aid has a well-established and significant role in international relations. The role of foreign aid in the repertoire of international development programs is extensively documented, with its goal being the promotion of human and economic development. Foreign aid can be defined as “all forms of assistance that a country derives from other governments or multilateral agencies and financial institutions to fill noticeable gaps, especially in production, savings, and investments; it takes diverse forms such as grants, loans, foreign direct investment (FDI), joint ventures, and technical assistance” (Omotola and Saliu, 2009, p. 88). Foreign aid offers numerous benefits, including a long-term positive influence on economic growth (Karras, 2006), and its function in reducing poverty has been acknowledged (Mahembe and Odhiambo, 2018). There is also evidence that aid improves human development and infant mortality prevention outcomes (Gomanee et al, 2005, p.299), making it a popular tool (Figure 1). However, given that foreign aid is “anything but simple” (Ridell, 2008, p.1), it is associated with several drawbacks. For instance, the provision of aid can facilitate opportunities for corruption and bureaucratic misconduct, which can threaten good governance (Booth, 2012). If this happens, foreign aid can play a hostile role that diverges from its purported purpose, especially considering that evidence indicates aid can have the consequence of increased inequality vis-à-vis income distribution (Herzer and Nunnekamp, 2012). Furthermore, poor quality institutions (Kabir, 2020) can reduce further the effectiveness of foreign aid—a consequence made especially stark given that many developing countries are characterized by institutional deterioration. This forms an important backdrop to claims that corruption has increased due to foreign aid, which can be fungible by nature because of its possible utilization by recipient states for a variety of unintended purposes (Mahembe and Odhiambo, 2018).

Suggested Citation

  • Noamane Cherkaoui, 2022. "The Sovereignty of Developing Countries: The Challenge of Foreign Aid," Research papers & Policy papers on Economic Trends and Policies 2221, Policy Center for the New South.
    • Handle: RePEc:ocp:rpaeco:pb_45-22
    as

    Download full text from publisher

    File URL: https://www.policycenter.ma/sites/default/files/2022-07/PB_45-22_Cherkaoui.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:bla:devpol:v:27:y:2009:i:4:p:373-395 is not listed on IDEAS
    2. Helena Pérez Niño & Philippe Le Billon, 2014. "Foreign Aid, Resource Rents, and State Fragility in Mozambique and Angola," The ANNALS of the American Academy of Political and Social Science, , vol. 656(1), pages 79-96, November.
    3. Dos Santos, Theotonio, 1970. "The Structure of Dependence," American Economic Review, American Economic Association, vol. 60(2), pages 231-236, May.
    4. Herzer, Dierk & Nunnenkamp, Peter, 2012. "The effect of foreign aid on income inequality: Evidence from panel cointegration," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 245-255.
    5. Daina Chiba & Tobias Heinrich, 2019. "Colonial Legacy and Foreign Aid: Decomposing the Colonial Bias," International Interactions, Taylor & Francis Journals, vol. 45(3), pages 474-499, May.
    6. Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross‐Country Empirical Tests," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 310-329, October.
    7. Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid, public spending and human welfare: evidence from quantile regressions," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(3), pages 299-309.
    8. Philip Booth, 2012. "Does Foreign Aid Make the Poor Poorer?," Economic Affairs, Wiley Blackwell, vol. 32(s1), pages 1-1, March.
    9. de Mesquita, Bruce Bueno & Smith, Alastair, 2009. "A Political Economy of Aid," International Organization, Cambridge University Press, vol. 63(2), pages 309-340, April.
    10. M. Adnan Kabir, 2020. "Foreign Aid Effectiveness: Evidence from Panel Data Analysis," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(3), pages 283-302, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Noamane Cherkaoui, 2022. "The Sovereignty of Developing Countries: The Challenge of Foreign Aid," Policy briefs on Economic Trends and Policies 2221, Policy Center for the New South.
    2. Maekawa, Wakako, 2024. "United Nations peacekeeping operations and multilateral foreign aid: Credibility of good governance," World Development, Elsevier, vol. 176(C).
    3. Andrew Boutton, 2019. "Of terrorism and revenue: Why foreign aid exacerbates terrorism in personalist regimes," Conflict Management and Peace Science, Peace Science Society (International), vol. 36(4), pages 359-384, July.
    4. Miao Wang & Hong Zhuang, 2022. "Effect of official development assistance on adolescent fertility rate: within-country evidence," Economics Bulletin, AccessEcon, vol. 42(2), pages 566-590.
    5. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," CERDI Working papers halshs-00554285, HAL.
    6. Dierk Herzer & Philipp Hühne & Peter Nunnenkamp, 2014. "FDI and Income Inequality—Evidence from Latin American Economies," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 778-793, November.
    7. Rachel M. Gisselquist & Patricia Justino & Andrea Vaccaro, 2023. "Do the effectiveness principles matter for development?: Evidence from aid effectiveness data," WIDER Working Paper Series wp-2023-60, World Institute for Development Economic Research (UNU-WIDER).
    8. Usman Qamar Sheikh & Muhammad Zafar Iqbal & Hafiz Khalil Ahmad, 2016. "The Impact of Foreign Aid, Energy Production and Human Capital on Income Inequality: A Case Study of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(1), pages 1-9, March.
    9. Joaquin Morales Belpaire, 2012. "Decentralized Aid and Democracy," Working Papers 1212, University of Namur, Department of Economics.
    10. Mansor Ibrahim, 2018. "Finance And Inequality In Eight Asian Countries: Does Size Matter," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(1), pages 33-56, July.
    11. Udo Broll & Soumyatanu Mukherjee & Rudra Sensarma, 2020. "Risk preferences estimation of exporting firms under exchange rate uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(1), pages 126-136, February.
    12. Angelika J. Budjan & Andreas Fuchs, 2021. "Democracy and Aid Donorship," American Economic Journal: Economic Policy, American Economic Association, vol. 13(4), pages 217-238, November.
    13. Dierk Herzer, 2016. "Unions and Income Inequality," Economic Development Quarterly, , vol. 30(3), pages 267-274, August.
    14. Simplice Asongu, 2016. "Reinventing Foreign Aid For Inclusive And Sustainable Development: Kuznets, Piketty And The Great Policy Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 736-755, September.
    15. Lisa Chauvet & Flore Gubert & Sandrine Mesplé-Somps, 2009. "Are Remittances More Effective Than Aid To Reduce Child Mortality ? An Empirical Assessment using Inter and Intra-Country Data," Working Papers halshs-00966367, HAL.
    16. Acht, Martin & Omar Mahmoud, Toman & Thiele, Rainer, 2014. "Corrupt governments receive less bilateral aid: Governance and the delivery of foreign aid through non-government actors," Kiel Working Papers 1901, Kiel Institute for the World Economy (IfW Kiel).
    17. Ewelie, C. Justice & Omenihu C. Nwaorgu, 2021. "State Fragility and Humanitarian Crisis in Syria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(6), pages 313-318, June.
    18. Ahmed Raza ul MUSTAFA* & Mohammad NISHAT**, 2017. "ROLE OF SOCIAL PROTECTION IN POVERTY REDUCTION IN PAKISTAN: A Quantitative Approach," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 67-88.
    19. Kobayashi, Yoshiharu & Heinrich, Tobias & Bryant, Kristin A., 2021. "Public support for development aid during the COVID-19 pandemic," World Development, Elsevier, vol. 138(C).
    20. Hao Wang & Yuemei Ji & Qi Luo, 2020. "The Employment Effect of Inward FDI in China: What Do We Learn from the History?," CESifo Working Paper Series 8392, CESifo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ocp:rpaeco:pb_45-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Policy Center for the New South's Customer service (email available below). General contact details of provider: https://edirc.repec.org/data/ocppcma.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.