Foreign aid and poverty reduction in sub-Saharan Africa: A cross-country investigation

Gt Ijaiya,Ma Ijaiya

doi:10.4102/sajems.v7i3.1364

Abstract

The continuous increase in the rate of poverty in Sub-Saharan Africa can be linked to the inadequate management and use of international financial assistance such as foreign aid. Using a cross-country data, this paper examines the relationship between foreign aid and poverty reduction in Sub-Saharan Africa (SSA). The result obtained indicates that foreign aid has no significant influence on poverty reduction in SSA, because of the countries’ weak economic management evidenced by high levels of corruption, bad governance, and political and economic instability. To improve the performance of foreign aid directed at poverty reduction, the paper suggests the implementation of measures directed at good governance, macroeconomic and political stability.Incentives in Nigeria’s food manufacturing industries and their impact on output and prices

Highlights

Reducing poverty in Sub-Saharan Africa (SSA) has become a great concern to most governments, international organizations and people of this region given its consequences to their well-being
The reasons for this negative result can be linked to the weak economic management evidence by high levels of corruption brought about by heavy use of patronage and personal rule; bad governance brought about by authoritarian rules and governments; institutional failure which can be linked to political instability that are as a result of government turnover, military coups, ethnic violence and civil wars; macro economic instability captured by the volatility of economic variables like terms of trade, inflation and real exchange rate; conflict of interest between the donors and recipient governments and fungibility of foreign aid
The findings show that foreign aid is not significant to poverty reduction

Summary

Introduction

Reducing poverty in SSA has become a great concern to most governments, international organizations and people of this region given its consequences to their well-being. One of the international strategies that have appeared more prominent in recent times is foreign aid which if properly used would spur economic growth and reduce poverty. Some of the factors deduced as the reasons for this include the presence of weak economic management evidenced by high levels of corruption, closed trade regimes and macroeconomic instability making aid resources fungible. This has discouraged the flow of foreign aid to most less developed countries (see Burnside & Dollar 1997a, 1998; Collier & Dollar 1999)

Results

Discussion

Conclusion