The impact of foreign aids on poverty reduction: an international literature review

Abstract

Purpose- Lately after the occurrence of the Covid-19, there has been a substantial wave of the foreign aid funds from developed to developing economies aimed to back up the most effected countries. The concept of the foreign aids with the primary goal to eradicate poverty is not new to economy and social development scholars since it has been researched for decades. Methodology- The poverty eradication was adopted from what so called the Millennium Development goal (1990-2015) and Sustainable development goal that is expected to come to an end in 2030. This study qualitatively accesses the impact and the effectiveness of the foreign aid given to most developing countries with the aim to eradicate the poverty level. Findings- The main objective of this paper is having an empirical conclusion on the effectiveness of the foreign aid through the critical empirical reviews of the both quantitative and qualitative works done by different scholars in different countries. Conclusion- The study concluded that quantitatively it is illogical to conclude weather the foreign aid really contributes to poverty reduction in recipient’s country or not. This backed up by the presence of both empirical studies both in favour and against of foreign aids. The study further revealed that the effectiveness of the foreign aid toward eradication of poverty depend on many factors on both recipients’ and donor countries. Those factors include conditions attached to aids, allocation of the aids to targeted areas, authority of the states in decision making related to foreign aid and political influence. Finally, the study suggested that for efficient use the foreign aids countries should have a clear stipulated goals and area of prioritization. The countries also should have a clear monitoring mechanism to supervise the progress of the funds expenditure over time Keywords: International review, foreign aid, millennium development goals, poverty reduction, qualitative analysis. JEL Codes: F35, I30, I32