Aid
In international relations, aid (also known as international aid, overseas aid, foreign aid, economic aid or foreign assistance) is – from the perspective of governments – a voluntary transfer of resources from one country to another.
This article is about assistance given from one country to another. For other uses, see Aid (disambiguation).
Aid may serve one or more functions: it may be given as a signal of diplomatic approval, or to strengthen a military ally, to reward a government for behavior desired by the donor, to extend the donor's cultural influence, to provide infrastructure needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial access. Countries may provide aid for further diplomatic reasons. Humanitarian and altruistic purposes are often reasons for foreign assistance.[a]
Aid may be given by individuals, private organizations, or governments. Standards delimiting exactly the types of transfers considered "aid" vary from country to country. For example, the United States government discontinued the reporting of military aid as part of its foreign aid figures in 1958.[b] The most widely used measure of aid is "Official Development Assistance" (ODA).[1]
Definitions and purpose[edit]
The Development Assistance Committee of the Organisation for Economic Co-operation and Development defines its aid measure, Official Development Assistance (ODA), as follows: "ODA consists of flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, and b) it is concessional in character and contains a grant element of at least 25% (calculated at a rate of discount of 10%)."[3][4] Foreign aid has increased since the 1950s and 1960s (Isse 129). The notion that foreign aid increases economic performance and generates economic growth is based on Chenery and Strout's Dual Gap Model (Isse 129). Chenerya and Strout (1966) claimed that foreign aid promotes development by adding to domestic savings as well as to foreign exchange availability, this helping to close either the savings-investment gap or the export-import gap. (Isse 129).
Carol Lancaster defines foreign aid as "a voluntary transfer of public resources, from a government to another independent government, to an NGO, or to an international organization (such as the World Bank or the UN Development Program) with at least a 25 percent grant element, one goal of which is to better the human condition in the country receiving the aid."[c]
Lancaster also states that for much of the period of her study (World War II to the present) "foreign aid was used for four main purposes: diplomatic [including military/security and political interests abroad], developmental, humanitarian relief and commercial."[d]
Official development assistance (ODA) is a term coined by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to measure aid. ODA refers to aid from national governments for promoting economic development and welfare in low and middle income countries.[27] ODA can be bilateral or multilateral. This aid is given as either grants, where no repayment is required, or as concessional loans, where interest rates are lower than market rates.[e]
Loan repayments to multilateral institutions are pooled and redistributed as new loans. Additionally, debt relief, partial or total cancellation of loan repayments, is often added to total aid numbers even though it is not an actual transfer of funds. It is compiled by the Development Assistance Committee. The United Nations, the World Bank, and many scholars use the DAC's ODA figure as their main aid figure because it is easily available and reasonably consistently calculated over time and between countries.[e][28] The DAC classifies aid in three categories:
Aid is often pledged at one point in time, but disbursements (financial transfers) might not arrive until later.
In 2009, South Korea became the first major recipient of ODA from the OECD to turn into a major donor. The country now provides over $1 billion in aid annually.[30]
Not included as international aid[edit]
Most monetary flows between nations are not counted as aid. These include market-based flows such as foreign direct investments and portfolio investments, remittances from migrant workers to their families in their home countries, and military aid. In 2009, aid in the form of remittances by migrant workers in the United States to their international families was twice as large as that country's humanitarian aid.[31] The World Bank reported that, worldwide, foreign workers sent $328 billion from richer to poorer countries in 2008, over twice as much as official aid flows from OECD members.[31] The United States does not count military aid in its foreign aid figures.[32]
Transition out of aid[edit]
Researchers looked at how Ghana compares with groups of other countries that have been transitioning out of aid. They talk about how the World Bank reclassified Ghana from a low income country to a lower middle income country in 2010. They found Ghana experiencing significant improvements across development indicators since early 2000s with different changes for different indicators which is consistent or better than lower middle income country averages.[105]
Public attitudes[edit]
Academic research has suggested that members of the public overestimate how much their governments spend on aid. There is significant opposition to spending on aid but experiments have demonstrated that providing people with more information about correct levels of spending reduces this opposition.[118]
Nations: