Does foreign aid promote growth? Evidence from Africa Online publication date: Tue, 14-Feb-2023
by Ahmed Abou-Zaid; Mai Alghamdi; Sami Alabdulwahab; Shimaa Al Shahawy
African J. of Economic and Sustainable Development (AJESD), Vol. 9, No. 2, 2023
Abstract: This study investigates the impact of foreign aid policies on several African countries and their interaction with economic growth. Panel data analysis has been implemented for 54 African countries. The pooled, GLS and random effect methods have been incorporated to capture the impact of the foreign aid policies over economic growth. The study uses World Bank countries classification based on income. Furthermore, the countries have been divided into three groups based on income level. Our findings show that foreign aid has a positive significant impact, with minimal effect on economic growth. Also, the aid-growth relationship is non-linear and foreign aid has diminishing returns as the volume of aid increases. However, the rise of foreign aid dependence will create a moral hazard. This outcome is a consequence of channelling foreign aid to finance the service of standing debts instead of financing development projects.
Online publication date: Tue, 14-Feb-2023
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the African J. of Economic and Sustainable Development (AJESD):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email email@example.com