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The Effectiveness of Foreign Aid in Developing Countries: An Exploratory Review

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  • Mahembe, Edmore
  • Odhiambo, Nicholas M

Abstract

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.

Suggested Citation

  • Mahembe, Edmore & Odhiambo, Nicholas M, 2019. "The Effectiveness of Foreign Aid in Developing Countries: An Exploratory Review," Working Papers 25342, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:25342
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