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The studies on effectiveness of foreign aid have come through three generations and contain many arguments. Some experts charge that aid has enlarged government bureaucracies, perpetuated bad governments, enriched the elite in poor countries, or just been wasted. Others argue that although aid has sometimes failed, it has supported poverty reductio...
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... In another dimension, the political and trade allies of aid donors also explain why external aid varies from region to region and even within a particular region or country. For example, Jayathilaka and Bandara (2009) stressed that external aid provided by Japan usually flows more to the countries where Japan has much trading interest or where aid is tied to the purchase of Japanese products in return for the aid provided. In this way, external aid will be more, says, in the period of a high trading interest and less when trading interest is shifted from the country. ...
... A case in point is the approval of $500 million by the IMF on April 14, 2020 to cancel six months of debt repayment for 25 economies, 19 of which were in the region of Africa (Sun, 2020). Yet, other aid donors like Japan and South Korea may not give aid conditioned on the debt profile of the aid receiving economies but mainly on trade relations (Jayathilaka & Bandara, 2009). Therefore, on average, can the level of external debt burden determine the total amount of external aid granted by the donors? ...
Aim/purpose – External aid allocation by the donors in recent years has been fraught with instability and volatility. This has a negative consequence on the recipient econo- mies particularly those that are highly aid-dependent. A good solution to the problem requires much understanding of factors influencing the behavior of external aid in the respective recipient economy. In this study, the focus was on analyzing two economic factors uncommonly discussed in the empirical literature – the influence of the degree of economic freedom and external debt burden on aid allocation, with emphasis on African economy. Design/methodology/approach – The study constructs a probit model for the analysis using a panel dataset consisting of 48 African countries from 2010 to 2019. Findings – The key findings of the study include a significant positive effect of economic freedom on aid and it implies that the probability of an additional external aid allocation to African countries increases with an increase in the degree of economic freedom. However, external debt burden, albeit positive, is not statistically significant to motivate more external aid allocations to Africa over the sample period. Research implications/limitations – Hence, the pattern of external aid inflows in Africa is a reflection of a change in the degree of economic freedom in the region. Originality/value/contribution – In contribution to filling the gap in the literature on external aid inflow in the recipient economies, the study traced external aid fluctuations in Africa to external debt burden and the extent of restriction imposed on economic freedom in African countries. Keywords: external aid, economic freedom, external debt burden, probit regression. JEL Classification: F34, F35, C01, E02.
... Some experts explain that donations often enabling bureaucracies in governments; bad governments continue, the aristocratic and elite in poor countries continue enlarging their wealth, or these aids just been lost. Whereas the reality witnesses widespread of poverty especially in Africa and south Asia (Jayathilaka, 2009). Radelet clarified that donations are not necessarily be conducive to development. ...
... Besides, support in building infrastructure, or productive sectors like agriculture, or inserting new technologies to stimulate economic (Radelet, 2006). Some empirical studies proved that the concept of lending is more effective than just providing donations, because the amount of funding should be returned (Jayathilaka, 2009). ...
This paper trying to assess the impact of foreign aid on the Palestinian local development by focusing on the role of PLGS and monitoring the readiness of the Palestinian local development plans to face and manage the future in case foreign aid is cut off permanently from the State of Palestine. The paper poses main question: Is foreign aid "within the framework of the PLGS" being channeled within the proper course of local development? Taking into account the exceptional circumstances of building a State under colonialism and under a centralized system of government. Main results were presented via SWOT analysis which based on deep literature review, interviewing local officials, and identification of performance indicators which used in the assessment. Findings of this study pointed out that despite the fragility of the Palestinian local governance sector which has many internal problems and external challenges; there are many opportunities that must be invested within the available potentials in order to achieve sustainable local development. Besides, reducing the value of foreign aid until do without it is the proper course toward sustainable local development through changing the mentality of consuming into investing. The study presented many valuable recommendations to correct the path of local development in the state of Palestine and how to activate the positive aspects that related to obtaining foreign aid. Developing countries can rely on the results of this study as they are similar in the fragility of their administrative systems.
