From the Center for Global Development, 01/10/2006
Does
foreign aid help develop public institutions and state capacity in
developing countries? In this Working Paper, the authors suggest that
despite recent calls for increased aid to poor countries by the
international community, there may be an aid-institutions paradox.
While donor intentions may be sincere, the authors conclude that it is
possible that aid could undermine long-term institutional development,
particularly in sub-Saharan Africa. … The conclusions are two-fold: countries which receive a
substantial portion of their revenues from foreign aid may be less
accountable to their citizens, and they may face less domestic pressure
to maintain popular legitimacy. The more aid countries receive from
abroad, therefore, the less incentive they have to invest in effective
public institutions. … Also, allocating aid toward alternative development activities
might be most beneficial. Funding the eradication of endemic diseases,
peacekeeping activities, regional or global public goods, and debt
relief would most likely side-step the aid-institutions paradox.