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After the Second World War, the economy of Europe was destroyed so in 1948, the United States of America provided economic assistance to restore the economic infrastructure of Europe. This economic assistance was from 1948 to 1951. It later became known as the Marshall Plan and this is where the concept of foreign aid originated from. Foreign aid is simply defined as the transfer of capital, goods and services from one country to the other. Foreign aid could be in the form of humanitarian assistance or loans and it can be concessional. Aid in itself is not bad however aid to my country Ghana has not helped in any way.
To begin with, foreign aid to Ghana has promoted the aid dependency psychology. Evidence of the aid dependency psychology is the fact that, since independence till the present, Ghana has received loans from the International Monetary Fund seventeen times. The recent loan Ghana gained from the IMF was to deal with the external shocks from the COVID-19 pandemic and the Russian-Ukraine war which includes high inflation and the declining international reserves. Like the sixteen loans acquired before this one, the money would be used for a short-term purpose which leads to a long-term dependency on foreign aid. Another evidence of aid dependency psychology is that about 50% of Ghana’s budget depends on aid from donors and NGOs. Several infrastructural developments in Ghana were done by foreign countries and organizations. An example is the bilateral agreement signed between Ghana and China where, under the One Belt and Road project, China would fund infrastructural projects in Ghana worth 2 billion dollars.
In addition to this, foreign aid brings about poverty rather than ensuring sustainable economic development. Since independence, Ghana has received billions of dollars as aid and Ghana is poorer than it was at independence. It is an irony considering that the main logic behind foreign aid is poverty alleviation. Rather than the increase in economic development, Ghana faces a high unemployment rate, inflation and slow economic development. The more aid that flows from developed countries and NGOs to Ghana, the poorer Ghana becomes and the poorer Ghana becomes the more Ghana relies on foreign aid. On the 22nd of September 2023, Ghanaians went on a demonstration for the government to fix the country due to the high cost of living alongside unpaid salaries and allowances of civil servants. This alone is evident that even after seeking and receiving billions of dollars worth of aid since independence, Ghana is poorer than it was at independence.
Last but not least, foreign aid serves as the breeding ground for corruption. The relationship between foreign aid and corruption is disturbing. According to research done by the National Bureau of Economic Research, it shows that, in bilateral aid, the United States gives more aid to corrupt countries than it does to honest ones. An example is Nigeria is ranked the 24th most corrupt country globally as of 2023 and is one of the countries that have received more foreign aid from the USA. Though there is no evidence to show that foreign aid increases corruption, it is quite evident that the more corrupt a country is, the more aid it receives. Ghana is not any different. The more foreign aid Ghana receives the better the strategies for stealing and embezzlement which leads to more corruption, further leads to poverty and the result is more reliance on foreign aid which makes it a cycle and starts all over again. Ghana is ranked moderately in the corruption ranking index yet political corruption and unaccountability of the use of the nation’s purse is quite evident.
In conclusion, the original idea behind foreign aid and its purpose has not been realised in Ghana. Foreign aid in Ghana has served as a breeding ground for corruption, has increased aid dependency psychology, and has brought about poverty instead of economic development. To slow down or stop the negative effects of foreign aid in Ghana, it is needed for Ghana to deal with the root causes of its economic problems by establishing more industries that would convert raw materials into semi-finished and finished products and invest more in the private sector which would create more employment and generate revenue for the country.
Andrews N. (2019). Foreign Official Development Assistance (ODA) and Ghana’s Development. The Case of Bringing Culture Back to the Culture Analysis. Retrieved from www.internationalscholarsjornal.org
Cann E. O., et al (2013). Foreign Aid and Aid Policy Effectiveness on Economic Growth in Ghana. Retrieved from www.mpra.ub.ub-muenchen.de/69283/
Richman J. (2023). Here is the list of most corrupt to least corrupt countries in Africa as Transparency International releases ranking. Retrieved from www.todaynewsafrica.com
National Bureau of Economic Research. (2023). Corrupt Government Receive No Less Foreign Aid. Retrieved from www.nber.org
Boakye E. (2023). How China Is Buying Influence In Africa With Its Belt And Road Initiative. Retrieved from www.thebftonline.com