Research background: Foreign aid flows to Africa mostly the Low-Income Countries (LICs) have increased drastically since 2000. Increasing aid flows are expected to stimulate economic growth that can release resources towards enabling LICs to reduce aid dependency. Purpose: The purpose of this study is to discuss the dynamics of bilateral aid trends and patterns among 27 LICs in Africa during 2000–2017. The main question this study tries to answer is: how have aid sources, compositions and dependency changed in LICs? Research methodology: The study employs a descriptive analysis technique to analyses bilateral aid flows to LICs in Africa from 50 donors during 2000–2017. Results: Total net aid flows to LICs increased by 1.5 times during 2000–2017 and were predominantly in the form of grants (92.7%). The study found a shift of sectoral aid allocations from the economic and productive sectors towards the social sector. Net aid as a share of GDP increased almost two-fold; implying an increasing trend of aid dependency in several LICs. Novelty: This study tries to present a full account of bilateral aid flows both from Traditional Donors (TDs) and Non-Traditional Donors (NTDs), unlike many earlier studies that have focused on TDs.

The enormous volume of literature has widely discussed the aid–growth correlation while identification of their causal relationship remains elusive and mixed. The main objective of this article is to investigate whether aid sources matter for explaining the aid–growth causal nexus among African low‐income countries (LICs) during 2000–2017. A novel feature of this study is that it takes into account three proxies of aid (i.e. total aid [TA], traditional donors’ aid [TDA], non‐TDA [NTDA]), unlike most studies that use aid solely from TDs (TDA). It employs a dynamic panel causality model in a multivariate setting using investment and consumption as key conditioning variables to account for omitted variable bias. The study found a short‐run bidirectional causality between aid and growth for TA and TDA proxies but not for NTDA in neither direction. In the long‐run, the study found unidirectional causality from growth to aid for TA and NTDA aid but not for TDA. The overall result shows that the aid–growth causality among African LICs depends on the aid proxies used and the time horizon assessed. A key policy implication is that donors’ aid allocation decisions in LICs should take into account the specific causal relationship between aid and growth by aid sources and time periods.

This paper aims to shed some insights on the ongoing debate on the aid-growth nexus by examining whether sources of aid matters for explaining aid effectiveness. In doing so, we consider three main proxies for bilateral aid based on the three sources of aid such as total aid (TA); Traditional Donors aid (TDA) and Non-Traditional Donors aid (NTDA) as independent variables in a dynamic panel growth model within a system GMM framework. It uses a panel dataset from 25 Low-Income Countries (LICs) in Africa over the period 2000-2017. The main findings show that the impact of aid on growth appears to be negative and significant for TA and TDA proxies while it is positive but insignificant when the aid proxy is NTDA. A relatively larger share of TA and TDA disbursement away from the direct growth-enhancing productive sectors towards the unproductive sectors seem to have contributed to their strong negative impact on growth. The key policy implication is that governments in LICs in Africa and donors should work in collaboration to design effective ways for ensuring that TDA should target the direct growth-enhancing sectors.