The Dynamics of Foreign Aid Trends and Patterns Among Low- Income Countries in Africa

Abstract

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 Impact of Foreign Aid on Economic Growth in Africa: Empirical Evidence from Low Income Countries

“…Third, the majority (27 of the 34) LICs in developing countries are found in Africa, and a specific focus on African LICs could provide typical cases to understand the debate on the aidgrowth nexus. Fourth, donors' focus shows substantial variations across income groups (Greenhill et al, 2013;Mamo and Odhiambo, 2020). Furthermore, the trends of aid flows (by aid sources) to LICs in Africa in the Section 'Foreign Aid Dynamics in LICs: Trend Analysis and Stylized Facts' (see Tables 1-5) support the four main points discussed here.…”

“…Moreover, donors' focus substantially vary across income groups in Africa, where TDs strongly favored LICs while NTDs inclined towards MICs (Mamo and Odhiambo, 2020). The key implication of these studies is that examining the aid-growth nexus by donor groups is imperative to properly identify the true effects of aid on growth.…”

“…In the current rapidly changing global aid landscape, the debate on the aid-growth relationship among LICs in Africa becomes an interesting topic for several reasons. First, foreign aid continues to be a key resource for financing development needs in LICs (Alemu and Lee, 2015;Mamo and Odhiambo, 2020;OECD, 2017). Second, since 2000, there has been a call for doubling aid flows to the poorest countries or LICs mostly in Africa (UN, 2003;UNAIDS, 2005).…”

Foreign aid and economic growth nexus in Africa: Evidence from low‐income countries

“…Another justification for a rationale to this study is about its exclusive focus on African LICs. Obviously, in the current rapidly changing global aid landscape, the debate on the aid–growth causal relationship among LICs in Africa by aid sources becomes an interesting topic for several reasons, such as (i) foreign aid continues to be a key resource for financing development needs in LICs (Alemu and Lee, 2015; Mamo and Odhiambo, 2020; OECD, 2017); (ii) the aid convention demands for increasing aid flows to the poorest countries mostly in Africa (United Nations [UN], 2003; UNAIDS, 2005) and (iii) the majority (27 of the 34) LICs in developing countries are found in Africa. To further substantiate the points discussed here and support the rationale for an exclusive focus on African LICs, this study makes a quick review of the trends in aid flows to LICs and Africa by aid sources – TDs and NTDs.…”