The Effects of Foreign Aid on Economic Development in Afghanistan (2001-2015)

Abstract

The aim of this study is to realize the issue of foreign aid disbursements as practiced in Afghanistan by using objective perspective to specify the effects of foreign aid on economic growth. This research study will recognize the impacts of foreign aid disbursements on economic development as affected by the political and strategic considerations and also by corruption levels which could have significance to future foreign aid programs in developing and post-conflict countries similar to Afghanistan. This research uses secondary data and both qualitative and quantitative methods which is conducted by collecting information from books and articles also collecting socio-economic statistics from reports and surveys to analyse the conditions in Afghanistan. The study examines both advantages and disadvantages of foreign aid on economic development using theory, as well as empirical analysis of transnational countries. The results indicate that foreign aid programs alone are not sufficient and efficacious for the economic growth of post-conflict states like Afghanistan. However, after two decades of foreign aid inflows to Afghanistan, the socio-economic conditions has not been improved, in order to make contribution to development process of poor countries, the potential advantages assists as providing resources to improve infrastructure, agriculture, education and transfer of technology. The GDP growth of Afghanistan has been declined, level of corruption has been increased, poverty rate has been risen and unemployment has been increased in this period. The intended conclusion is to provide recommendations to make foreign aid programs in Afghanistan useful and beneficial to its economic development.

Can Foreign Aid and Remittances Reduce Poverty in Afghanistan An Application of Cointegration and Vector Error Correction Model

“…As foreign aid is 37% and remittances with an estimated 30% contributed to the GDP of Afghanistan (IMF, 2019), the likelihood of them having an empirically significant role in the economic growth and poverty reduction of the country. Fewer studies have been conducted so far on foreign aid and remittances and their relationship with the economy in the context of Afghanistan (Nasery, 2014;Arsalan, 2019;Deniz and Haidar, 2018). But none of the studies have been found to relate foreign aid and remittances with poverty.…”