Abstract:
Each year donors transfer tens of billions of dollars in the form of foreign aid to developing countries. Moreover, based on new pledges and greater commitments to development assistance from donor nations, there is a possibility of scaling up of foreign development assistance far beyond the current levels. From the donors’ perspective, the commitment to increase aid flows to developing countries is only the starting point. This, in turn, raises issues regarding the role of the donors’ aid allocation policies in ensuring aid effectiveness in enhancing overall development in the recipient states. This paper examines the debate that relates to the impacts of foreign aid to the recipient states. It also examines the loopholes and the blame such as ineffective aid channels, perverse environment and financial mismanagement, lack of financial monitoring infrastructure, the lack of aid transparency and access to information that the donor agencies must address if foreign aid is to bring any meaningful impact on the recipient states especially in the developing countries. In addition, this review paper explores on the best remedies that can be adopted to realize development from the foreign aid. These remedies include donor’s knowledge on the priority needs of the recipient state, recipient knowledge on their own needs, accountability by the donor agencies, empowerment of the intended beneficiaries, federalism /decentralization of governance structures, donor and recipient role in assessing how foreign aid is delivered and sanctioned in the recipient states.
