Transparency in Foreign Aid

Hello, everybody! I am going to write about ways in which foreign aid can be effective in strengthening the long-term economies of nations that receive aid. Some of the primary issues with foreign aid arise from the fact that it is hard to regulate where foreign aid money ends up. This does not necessarily mean that the governments of nations receiving aid are misusing funds but that they are not allocating aid to sectors of the economy in which would bring the highest rates of return if invested in. Providing aid to some sectors may fuel the aid-dependency cycle, while investing aid in other sectors may reduce aid dependency in the future.

Investment in specific sectors, such as education or agriculture, greatly benefit a nation’s economy and can reduce future reliance on aid. These investments have to be targeted—you cannot just dedicate a sum of money to schools or farmers with a vague goal in mind. Policy makers have to devise specific plans that increase the quality of education, whether that means investing in early childhood education or specifically addressing regions of a country where literacy rates are low. In terms of agriculture, this could mean investing in sustainable agricultural practices, such as those that promote long-term fertility. Thus, governments receiving foreign aid can invest in specific sectors and policies that will strengthen their economies and eliminate the need to receive large sums of foreign aid.

The question is, how can donor nations ensure that the aid they give will be used effectively to reduce aid dependency in the future? The Brookings Institution and Publish What You Fund developed the Aid Transparency Index in 2018, which publicly provides aid data from around the world. By publishing where aid comes from, where it is going, and how it is used allows for research institutions and donor nations to assess what type of aid is most effective and if governments are being transparent in how they are dispersing aid. It also allows researchers and policy makers to analyze this data and determine what types of aid have been most successful in generating the economic results they desire to achieve.

To read more about how greater accountability and transparency regarding foreign aid can make the effects of aid more efficient, read these web pages and articles:

http://www.publishwhatyoufund.org/why-it-matters/what-you-can-do/

https://www.global-economic-symposium.org/knowledgebase/the-global-economy/effective-investments-in-education

https://www.brookings.edu/blog/up-front/2018/06/21/how-better-aid-transparency-will-help-tackle-global-development-challenges/