Foreign Aid and Economic Growth: Does It Plays Any Significant Role in Sub-Saharan Africa?

Abstract

The effectiveness of foreign aid on economic growth is a much debated topic on the field of Development Economics. As such, a huge body of literature is available with the vast majority concluding that aid contributes in increasing growth (Hansen and Tarp, 2000); although some scholars, amongst them Boone (1996), Ovaka (2003), and Moyo (2009) hold a different and an opposite view. Aware of the fact that Sub-Saharan Africa is the poorest region in the world (Chen and Ravallion, 2012), (World Bank, 2012), and that Sub-Saharan Africa is the region which is the biggest beneficiary of aid (Lancaster, 1999), (OECD, 2010); but nevertheless aid in this region seems not to produce the expected results. There is a high volume of literature on the impact of foreign aid on development in Africa, yet not many of them recognize all the factors that contribute to aid (in) effectiveness. The focus is often on macro-economic indicators which do not fairly represent the realities of poverty and suffering in many African countries. We offer an analysis of the theories that have been propounded to explain the relationship between aid and (under) development in Africa. In this paper, we critically examine such findings

Keywords: Corruption; Foreign aid, Economic growth, Sub-Saharan Africa.