The Impact Of Foreign Aid On Development In Africa: A Comparative Study Of Ghana And Angola.

Abstract

With key focus on impact of Foreign Aid in Africa, the study focused on comparative analysis of both Ghana and Angola. The study was guided by three objectives namely; to analyse the historical development of foreign aid and its impact on development in Africa, to critically examine the impact of foreign aid on development in Ghana and Angola and lastly to identify and analyse factors hindering effective utilization of foreign aid for development in Ghana and Angola. The ever widening socio-economic gap between developing and developed nations has continued to dominate international relations for a long time. The widening gap has led to developed nations channelling capital to developing nations in order to stir development and bridge the existing gap. Evidence however suggests that decades of foreign aid inflows to Africa has had little impact in altering the destinies of most African states, many of which have registered low developmental and growth rates. Estimates point to the fact that African countries like Angola and Ghana have spent more than US $500 billion of foreign aid capital in the last decade alone, yet under-development in the two countries continues to persist. It is this persistent under development that continues to be witnessed despite foreign aid inflows into the recipient nations. The concept of foreign aid has its roots from the Bretton Woods conference held in New Hampshire in 1944, according to the analysis of the historical progress of foreign aid development in Africa. In Africa, foreign aid began gaining relevance during the 1960s when most African states acquired independence from their colonial masters. At the time, development aid was nonconcessional and was largely an extension of goodwill to the states that had just attained independence. Former colonial masters like France and Britain saw it as a moral obligation to continue supporting their former colonial territories but also as a means to access natural resources and retain political influence in their former colonial territories. A surge in private assistance in recent times has seen it become an important source of foreign aid to Africa as a whole. Private corporations, institutions, NGOs, and certain religious groups now make significant aid contributions to Africa. Estimates indicate that the annual private assistance to Africa targeted towards some programs could soon surpass official aid. The study has found out that foreign aid disbursements in Ghana have had mixed outcomes on development. Foreign aid has promoted economic reforms in Ghana such as reduction of the tax burden, increase of revenue at the local level, and revenue mobilization through tax reforms. Besides, foreign aid has had significant impacts on infrastructural development in the country. the study also reveals that the volatility of foreign aid over recent decades has increased with high variations between foreign aid commitments and disbursements. These inconsistencies have thus resulted in a decline of foreign reserves, a high balance of payment deficits, and high domestic borrowing for Ghana. The study has revealed that foreign aid has had major impacts on development in the sectors of education, agriculture, health, and basic infrastructure in Angola. Other studies argue that foreign aid has not led to sustainable socio-economic development in Angola, citing poor living standards, high rates of unemployment, corruption, and poverty as the main reasons. Foreign aid has improved development and also strengthened government policies in the two countries. Some of the factors that hinder effective utilization of foreign aid are poor aid management and coordination, donor fragmentation, aid volatility, the lack of local participation in aid projects, and the shortage of counterpart funds for aid project/programme recurrent costs. These factors need to be addressed to realize the full effectiveness of foreign aid to African countries.