Altering the foreign aid equation

Posted in: International development

Ali Salman is Founder and Executive Director of the Policy Research Institute of Market Economy in Islamabad, and is studying on the IPR's Professional Doctorate programme.

The West has spent US$2.3 trillion on foreign aid over the last five decades and has not managed to “get 12-cent medicines to children to prevent half of all malaria deaths, or $3 to each new mother to prevent 5 million child deaths,” writes William Easterly, the author of The White Man’s Burden: How the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good.

Easterly believes that economic development comes not through aid, but through the home-grown efforts of entrepreneurs and social and political reformers. It could also be added that strengthening of the civil society also helps in economic development.

Criticisms of government-to-government foreign aid can be divided into two groups. One group rests its claim on the technical evaluation of aid programmes, thus raising doubts about the efficacy of foreign aid - especially in relation to poverty reduction. This group makes recommendations for improving the programme design and accountability mechanisms, but it accepts the basic paradigm of foreign aid that the poor need external help. This is aid managerialism.

The other group criticises foreign aid in terms of its probable use as a leverage to extend influence on the domestic policy of developing countries. This group raises fundamental questions about how the aid is structured and relates it with what it calls a neo-imperialist agenda.

In most cases, 75% of aid money goes back to donor countries in the form of contracts and supply of goods. Governments are often engaged in a turf war when negotiating the terms of engagement with foreign aid agencies.

The currently enforced Foreign Contributions Act 2015 in Pakistan links the use of foreign aid with transactional approval from the Economic Affairs Division. This is aid politics.

There are important actors in foreign aid – the aid professionals, consultants, evaluators and international and local contractors. They associate themselves with governments, civil society and donors. More often than not, they broker the flow of aid between donors and recipients by preparing programmes, proposals and projects. Their interest obviously lies in expanding foreign aid. This is aid business.


The problem with the first argument – aid managerialism – is that it may end up demanding more foreign aid and, just like any failed government programme, it gets more budget. This just feeds into the foreign aid cycle and increases the cost of fundamental change.

The problem with the second argument – aid politics – is that it may deny external resources when and where they are needed the most, especially for meeting challenges of the on-going humanitarian crisis including disaster preparedness and mitigation.

This argument also increases the risk of government’s increased control in the recipient country, which in turn could be utilised to further a government head’s undemocratic ambitions.

Possible remedy

An alternative scenario, a hypothetical one, can be considered in which there is no government-to-government foreign aid. In such a scenario, the recipient government declares a ban on foreign aid for publicly funded programmes and departments such as public education and health.

Instead, it creates channels and mechanisms where foreign aid can flow directly to civil society, NGOs, the private sector and philanthropic organisations, serving the same purpose of public goods delivery, albeit in a much more cost-effective manner.

An immediate consequence of this ban will be a fundamental change in intergovernmental relationships altering the power structure. At the same time, it will keep donor countries committed to the Sustainable Development Goals. This is aid globalism.

Altering the foreign aid equation by this fundamental shift will strengthen civil society and private institutions, which will also bring a positive change to social and political structures in the recipient countries.

The re-directed foreign aid will be government-light, society-heavy. Governments on both the donor and recipient sides will have reduced controls. However, this should not undermine collective efforts to make aid flows more transparent and more accountable.

Under aid globalism, less money will be flown back to donor country-based contractors and less money will be stuck in the bureaucratic gridlock of recipients. More of the aid will reach the places where it is needed the most.

This article originally appeared in The Express Tribune.

Posted in: International development


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  • Dear Ali, It’s a pity you start with a loaded quote from Easterly, for in countering the often contradictory criticisms of foreign aid you then illustrate the important point that this term conceals a huge range of activities that belie glib generalisation. Arguing for more society-heavy and government-light modalities begs more questions. Sadly political crack-downs on aid for civil society are increasing (e.g. see ‘Hands Off My Regime’ – an analysis of shrinking civic space by Dupuy, Ron and Prakash in World Development, 2016, Vol.84). In contrast, channelling aid for and through private for-profit organisations is growing fast and would I think benefit from more scrutiny. Andrew Fyfe – Head of Evaluation at the UN Capital Development Fund and a fellow DPRP student – can no doubt share some ideas on that.

  • The donor countries should be encouraged to consider legislation on foreign aid flows to define how much aid can flow back to the donor country and how much aid should be channeled in a given year through recipient government.