Abstract

This study examined the effects of foreign aid on economic development of Cameroon. To attain the objectives of the study, the researcher adopted a descriptive survey design and used closed ended questionnaires to collect data from 50 people in Buea municipality. Respondents were sampled using convenience sampling technique.

Data were analysed using the Statistical Package for Social Sciences (SPSS) mainly with descriptive statistical tools like tables expressed in frequency and percentage distributions. The study found that foreign aid has both positive and negative effects; particularly in terms of poverty reduction and improving access to basic services.

Also, foreign aid can enhance economic development through various means, such as the provision of basic services and the prevention of conflicts. It was concluded that corruption and poor governance, foreign currency gap and capital flight, and the increasing world population are the main challenges faced by the UN in promoting economic development.

It was recommended that the aid organizations and governments should carefully consider the potential negative effects of foreign aid and design policies that maximize the positive effects of aid while minimizing the negative effects. This may include measures such as promoting good governance, increasing transparency and accountability, and focusing on sustainable development.

CHAPTER ONE

INTRODUCTION

1.1 Background to study.

According to CFI Team (2022:1) Foreign aid refers to the international movement of money, services, or goods from governments or international institutions for the benefit of the receiving country or its citizens. Foreign aid can be fiscal, military, or humanitarian and is considered one of the significant sources of foreign exchange.

Foreign aid is the voluntary movement of money or other resources from one nation to another. The transactions are mostly from developed countries to developing countries. A developing nation typically lacks a strong manufacturing base and is distinguished by a low value of the Human Development Index (HDI). Foreign aid may be offered as a contribution or a loan, which can either be a hard or soft loan. If the loan is in a foreign currency, it is termed as a hard loan,(CFI Team 2022:1).

Purpose of Foreign Aid

Foreign aid may require the transfer of professional advice and training, or commodities or financial resources. Financial resources can occur in the form of concessional loans or grants, such as export credits. Official Development Assistance (ODA) is the most common form of foreign aid, which is the help provided to support development and to fight poverty. The main source of ODA is the bilateral grants from one country to another, while some of the funding is in the form of loans, and often it is channeled by non-governmental organizations and foreign organizations,(CFI Team 2022:1).

Countries also offer foreign aid in order to improve their own security. Economic aid may also be used to discourage friendly countries from coming under the control of unfriendly governments or paying for the right to set up or use military bases on foreign soil,(CFI 2022:1).

Foreign aid can be used to accomplish the political aims of a government, allowing it to obtain diplomatic recognition, to gain respect for its role in international institutions, or to improve the accessibility of its diplomats to foreign countries,(CFI Team 2022:1).

Foreign aid also seeks to promote the exports of a country and spread its literature, culture, or religion. Countries often provide aid to relieve the distress caused by man-made or natural disasters like drought, illness, and conflict. It helps to promote sustainable prosperity, create or reinforce political institutions, and address a range of worldwide concerns, including cancer, terrorism, and other violations, and environmental degradation,(CFI Team 2022:1).

Types of Foreign Aid

Tied Aid: Tied aid is a type of foreign aid that must be invested in a country that is providing support or in a group of chosen countries. A developed country can offer a bilateral loan or grant to a developing nation but will be required by the government to invest the money on goods and services produced in that country,(CFI Team 2022:1).

Bilateral Aid: Bilateral aid is given directly by one country’s government to that of another country’s government. It occurs when money flows from a country with a developed economy to a country with a developing economy. Bilateral aid is directed by strategic, political, and humanitarian interests. This is meant to further foster democracy, economic growth, peace, and sustainability of long-term programs,(CFI Team 2022:1).

Multilateral Aid: Multilateral aid is the support offered by several countries that share funds to foreign organizations such as the United Nations, the World Bank, and the International Monetary Fund (IMF). The funds are used to relieve hunger in developing nations. While the sector represents a minority of financial aid of the U.S., the donations provided by the country make up a large proportion of the donor funds obtained by the organizations.

Military Aid: Military aid typically allows the recipient country either to procure weapons or security contracts directly from the U.S. In other situations, it actually simplifies the mechanism by enabling the federal government to buy weapons on its own and ship them to military transport,(CFI Team 2022:1).

Project Aid: The assistance is known to be project aid when the funds are used to support a certain project, such as a hospital or school,(CFI Team 2022).

According to Todaro and Smith (1980:12) “development is not purely an economic phenomenon but rather a multi-dimensional process involving reorganization and reorientation of the entire economic and social system.’’ From the perspective of the state, Anamzoya (2010) defines development as “the capacity of a state to increase its human resource to achieve a higher outcome of production for the satisfaction of the basic needs of a majority of its citizens and empower them to make demands on the government.’’ Todaro and Smith mentions the main motive as a rational economic consideration.

Mobility to urban areas has two expectations of gaining employment and higher income expectations than those in the countryside. Thus the mobility of the urban villages simultaneously reflects the imbalance between the village and the city, therefore, the direction of population movement also tends toward cities with larger economic powers and is expected to meet their economic needs, (Todaro and Smith 1980:21).

1.2. Statement of the Problem

The effects of foreign aid on economic development is based on the fact that economic development on country’s or organization can sometimes be insufficient in realizing certain projects or ideas, which makes for the assistance of foreign aid which at times can be seen as a blessing or disease to development of a country or organization economically. foreign aid, the international transfer of capital, goods, or services from a country or international organization for the benefit of the recipient country or its population.

Aid can be economic, military, or emergency humanitarian (e.g., aid given following natural disasters). Foreign aid can involve a transfer of financial resources or commodities (e.g., food or military equipment) or technical advice and training.

The resources can take the form of grants or concessional credits (e.g., export credits). The most common type of foreign aid is official development assistance (ODA), which is assistance given to promote development and to combat poverty. The primary source of ODA—which for some countries represents only a small portion of their assistance—is bilateral grants from one country to another, though some of the aid is in the form of loans, and sometimes the aid is channeled through international organizations and nongovernmental organizations (NGOs).

For example, the International Monetary Fund (IMF), the World Bank, and the United Nations Children’s Fund (UNICEF) have provided significant amounts of aid to countries and to NGOs involved in assistance activities. Countries often provide foreign aid to enhance their own security.

Thus, economic assistance may be used to prevent friendly governments from falling under the influence of unfriendly ones or as payment for the right to establish or use military bases on foreign soil. Foreign aid also may be used to achieve a country’s diplomatic goals, enabling it to gain diplomatic recognition, to garner support for its positions in international organizations, or to increase its diplomats’ access to foreign officials. Other purposes of foreign aid include promoting a country’s exports (e.g., through programs that require the recipient country to use the aid to purchase the donor country’s agricultural products or manufactured goods) and spreading its language, culture, or religion.

Countries also provide aid to relieve suffering caused by natural or man-made disasters such as famine, disease, and war, to promote economic development, to help establish or strengthen political institutions, and to address a variety of transnational problems including disease, terrorism and other crimes, and destruction of the environment. Because most foreign aid programs are designed to serve several of these purposes simultaneously, it is difficult to identify any one of them as most important.

1.3 Research Questions

1. What are the positive and negative effects of foreign aid on economic development?
2. To what extent does foreign aid enhance economic development?
3. What are the challenges faced by the UN in economic development?

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