Role of Aid Politics on Its Effectiveness for Global Development Purposes

Abstract

Foreign aid has been distributing for many decades with the ‘theoretical’ expectation that it will work as a catalyst for development by boosting domestic savings, investment and economic activities. But in ‘practice,’ foreign aid has been debated for its performance. Particularly in the 1990s, this debate has peaked when the scholars had sufficient amount of evidence to spot aid as ‘partly’ successful. Despite multiple views and several disagreements persist regarding the success of aid, still, poor performance is more or less evident. Many reasons have come forth so far to explain this ineffectiveness of aid. This paper- based on the literature review- tries to indicate the role of politics in making the foreign aid ineffective. It is evident from the review, the main reasons associated to ‘politics’ for aid ineffectiveness are, irrational selection of aid recipients, excessive conditionality of foreign aid, lack of coordination among donors and the divisive role of political elites in recipient countries. Although, in recent decades, donors have changed their ways of aid allocation which improves aid performance in compare to pre-cold-war period, nevertheless many miles to go. Performance driven and altruistic allocation of aid should be the most desirable way that could save the taxpayers’ money from misused.

Keywords: Foreign Aid, Aid Conditionality, Aid Selectivity, Altruistic aid Allocation, Rent Seeking Behaviour, Inflated Aid.

JEL Classification: F35