Revisiting Foreign Aid Theories

Abstract

Foreign aid, as a subject matter of political economy, has been intensely debated in global development discourse and international politics. Does aid lead to growth and development of the underdeveloped countries? Or is it an instrument used by donor countries to promote their domestic and foreign policy interests? The theory and practice of foreign aid suggest that even if it may be useful for the economic development of underdeveloped and developing countries in the initial stages; development comes through indigenous efforts and not through foreign aid. Moreover, there are serious political and economic hazards of a foreign aid led growth model and long-term dependence on foreign aid. Therefore, foreign aid may be desirable but not essential for the development of these countries. But more importantly, while negotiating aid, the recipient countries should be cautious of donor motives and their own national and foreign policy interests.