Mediation on Aid to African Countries and Their Impacts

Introduction

Aids programs were mostly initiated by most of the Western countries during the independence of the African states in the 1960s. African governments were encouraged to adopt policies encouraging industrial growth and plan developments. Increased poverty eradication was the focus of donor aids in 1970s, with a priority of developing rural areas. The economic crisis in the 1980s also influenced the focus on the donor funds in the African settings.

The focus shifted to economic policies and the importance of stabilization and structural adjustment reforms, and quick-disbursing instruments for building government capacity, those that would also bring policy change were needed by the donors. The aids were used to fund balance of payments for those governments supporting economic-reforms based on minimal governmental intervention in the economy among other requirements (Lanchaster, 2000; qtd. in Yamada, 2002).

Projects that have been funded by the foreign donors have proved to be helpful to the local population in most of the African countries where they continue to suffer in abject poverty. Where there exists good administrative and institutional environment and a government that is reform-oriented, the project aids can accelerate the process of development. Where the aforementioned climate does not exist, SWAPs and budgetary reforms may be used to address them.

A local backing from the host government is also necessary for the donor to enhance ownership and sustaining of the projects at the sector and macro levels. Countries were able to improve their balance of payment through Structural adjustment operations (SALs) which were used to assist countries with crisis. However, SALs did not effectively promote long term sector objectives because they did not control how funds were spent within sectors. Although the Sector adjustment operations (Secals) could lead to increased sector expenditure for the countries concerned, the increases do not translate to improved sector outputs and performance (World Bank, 2001; qtd. in Yamada, 2002).

Aid has been criticized on the basis of weak impact on the sector level, fragmentation and ownership. Project sustainability faces negative effects due to the project aid tending to undermine local commitment and local ownership as they tend to be donor driven. The fragmentation of project aid may make the government capacity to be dispersed over small units, and the whole thing may lack overall view as a result of paying attention to some specific projects.

In addition, sufficient attention to policy, administrative and institutional policies under which project must operate, may lack. According to Mosley and Eeckhout, project aid may influence the economic decision and spending of the government by allowing it to spend into issues of less priority and especially into political patronage for a corrupt government (qtd. in Yamada, 2002). Moyo holds the opinion that even after many years of donor funding, African countries have increased poverty levels, continued to rely on these funding (termed as overdependence on the donors’ funds), enhanced corruption, declined or poor growth and distorted markets.

By giving a limelight on the countries that have rejected donor funding as a key to project development yet prospered and those that have continued to rely on the funding and continued to be poor, Moyo has shown that countries in Africa can survive without funding. He proposes a number of things that can help in solving the problem. These include trading with China and accessing microfinance (Moyo, n.d.).

Moyo’s view is opponent to the traditional and postwar development policy and belief that aids that have trickled in billions into African economies have helped reduce poverty and increased growth (Moyo, n.d.).

Financial funding has not only been used as economic but also political tools for statecraft. Since financial aid is considered a symbol of cooperation or unity between two countries, the receiver may be manipulated to transfer other political benefits as well, which are independent from the funding purposes.

The effects of donor funding

The economic side effects of donor aid to Africa have been premeditated elsewhere. Continued reliance on aids, and its availability to the African community has eased the financial pressure on them to carry out economic or other reforms. An example has been used by Lanchaster on the situation in Tanzania, where availability of donor aids have led to decreased financial pressure to discontinue with unwise policies (34). This scenario is termed as soft budget.

The government of France and the World Bank contributed in this problem by easing an unmanageable gap in the balance of payment. While Ivory Coast (primarily) sought to ease the balance-of-payment by depressing domestic prices, the World Bank was forced by the African and the French government to provide assistance (Lanchaster, n.d.). The author reports that even the World Bank was aware of the negative impacts which may raise further questions on why they failed to stop the implementation if their motive was alright.

According to Lanchaster, African countries seem to have shelved the painful reforms necessary in improving trade balances and spurring their economies in the event of foreign aid surge during the 1970s. Further dampening of the financial pressures for reforms may also have occurred during the partial implementation of economic reforms of the 1980s through continuation of large aid programs.

Surge in foreign aids can result in the large increases in foreign exchange, the same way sizeable inflows of commercial capital or foreign direct investment and the sudden increases in export prices and earning can, leading to inflation and real appreciation in exchange rates-called the “Dutch disease”. Inflation may result from the usage of these windfalls of foreign exchange for domestic goods in sectors with high employment and capacity utilization, and this inflation can result to real appreciation in the exchange rates which may encourage imports and discourage exports. Oil-producing countries have been observed as having undergone an undercut in their development as a result of major cases of the Dutch disease.

Countries in Africa have been in demand of real depreciation in exchange rates so as to improve exports and discourage exports, which have not been granted by the donor funds (36). The impact of donor funding on the exchange rates and the domestic price levels has been reduced because most aid funds are not used to purchase domestically produced goods but finance imports. In addition, there are effects of the unavoidable expenditures in the domestic scenes towards the accommodation and services to field representatives. An evidence of the Dutch disease was found in Ghana, which benefited from the financial aid surge during the 1980s (37).

Incase Falling and increasing aid levels by many nations has been interpreted as symbolizing cool or warm relationships respectively, even though this may not have primarily been the intention of the country donating or the international communities. The legitimacy of the receiver government may be compromised in the domestic and international level if the donations are interpreted as elements of control. One of the worst scenarios is where the future decisions on economic matters are negatively influenced.

The likelihood of the donor funding supporting continued corruption and bad governance among other things, through approbation of regimes in the African countries can be understood in the context with which the foreign governments have influenced legitimacy for these governments despite their failures. According to Lanchaster, symbolic function of foreign aid was not important to African countries with regimes which were relatively strong, but that it was important for those with weak regimes.

The symbolic function of the foreign aid can be conceptualized in that African countries would receive active support from a foreign power and together with the symbolizing of the approbation, the legitimacy of the government would thus be boosted. The aforementioned author mentions the case of the Zaire’s former president, Mobutu, who would rally for support for legitimacy from both the United States and the French or Belgians even though he was widely unpopular in the domestic scenes. He associated with countries that would have affected the Zaire’s diplomatic relationship with other countries.

The United States for example would help keep the French and the Belgians from acting to remove him or cut him off, and African countries would be pulled towards maintaining a modicum of relationship with the leader and the other African leaders would not freely criticize him in public. The prominent leader was forced out after the United States and Belgium ceased their support for him. In this example, it is possible that if foreign aid is provided to a regime with a weak legitimacy, it is possible that the regime will be prolonged.

In fact, Lanchaster views that symbolic function of foreign aid was important to countries with weaker legitimate regimes dogged with corruption, which were inept and repressive. The aforementioned author posits that several of the worst governed states-Sudan under President Numeiri, and the former Zaire- and collapsed States (Somalia and Liberia) “were among large recipients of U.S. aid over an extended period” (n.d.).

Similar attempts by some African countries to strengthen their legitimacy after independence may be understood by the action of African countries’ quest for seeking diplomatic relationship with large number of countries, especially the most powerful countries after independence, in order to foster legitimacy by emphasizing the symbols of statehood and their rule. Ghana, for example, established more embassies (50 in number) than it could justify and afford. Foreign countries, especially the most powerful were encouraged to set up embassies in African capitals.

Overdependence of aids by the African countries has happened because of relying on high levels of these funds over a long period of time as compared to short-term based financial assistances. These funds become essential parts of the funds and the economic patterns which are not easily replaceable. The effects of overdependence can be hardly felt with the withdrawal of these funds since the economic and political systems become disrupted.

Dependence for an aid for a longtime may not necessarily be with negative effects, for example, where it has been used to fund developments and therefore reduce the need for the aids in future-like the case with Botswana (Lanchaster, n.d.). The case with many countries which rely heavily on donor funding for a long time without the ability to reduce reliance on the funds, experiencing little growth, and which have little prospects of reliance on donor aids diminishing significantly need cause concern. The possibility of a looming crisis due to over-reliance on donor funds has been given a thought.

The countries which have very heavy reliance on donor funding face the likelihood of higher disruption of their structures should there be a shortage of these funds. There is therefore no certainty as relates to the provision of these funds. Countries relying on these funds may experience budget constraints on expenditures even after the planning and preparation of the government expenditure. Serious disruptions may lead to permanent loss of jobs where these funds are used to directly or indirectly fund the country’s private and public sectors.

The African governments which continue to rely on the foreign aids for government expenditures, especially the investment expenditure, may loose the sense of initiative, responsibility, and accountability for the recipient governments to their own populations. This accountability is left to the donor countries.

The basic view on the benefits of the donor funding has been discussed. The governments giving aids usually argue that they want to reduce poverty, support development projects and investments among other things. The reduction of poverty can be achieved through funding the financial systems of the country for example through the Poverty Reduction Programs (PRBS) where the country spends the money to pay the workforce and its systems.

The DFID provides such assistance when the country is able to meet some international obligations; committed to fighting corruption, promoting good governance and transparency, poverty reduction, upholding human rights, and when there are significant benefits on PRBS as relates to other forms of aid. Such fund has been used to increase funding in Rwanda, Tanzania, and Mozambique; increase accountability between the finance ministry and the sector ministry, reinforcement of the macroeconomic stability and good economic management; strengthened government systems including better budget management.

There can’t be an all-correct condemnation of funds to the African countries. There has been collaboration among the multilateral and the bilateral donor agencies (Strategic Partnership with Africa (SPA). What may stand out is the fact that there may require necessary measures to keep things in order and continue on the right direction. The fact that the shortcomings in the donor funding projects can be corrected need be paid attention to.

The aforementioned collaborating body provides for this through the assessment of the aid effectiveness problems, develops solutions and builds support for reform. It is in fact wrong to assume that no special attention has been paid or special efforts have been implemented to seal the loopholes. Initiatives put in place to ensure things are running well include co-chairing a Budget Support Working Group by the DFID, which has also financed an independent survey of all donor’ budget in Africa. In fact, an SPA study on how best to ensure donor aid can be reflected in the national budget process has been commissioned by the DFID.

The ability for the donor funds to be used to assist the countries which are coming out of crisis like post-war crisis must be supported. These countries are likely to come out of these situations with distorted economic structures that require rebuilding. Source of funds from the donors has not only been used to support the suffering masses in these countries, but also to finance political and economical structures in them.

Many of the countries in Africa continue to face poor or weak democracies and are faced with political instabilities, and some others wars time after time. A few options on source of funds may be available for these countries, and donor funding from the international communities or powerful countries is better placed. More over, these countries may not show signs of improvements in the near future because stable structural reforms and rebuilding is needed for economic rebuilding, and therefore continued presence of the donor funders for projects might avail the best route towards reconstruction.

Some countries in the Africa continent continue to face food shortages and other economic crisis which they are not able to solve on themselves. Acceptance of the assistance always would be taken as a better option and quick-fix rather than the persisting of these difficulties, even when the host countries still feel that it is not the best option.

More benefits of project aids have been discussed. The shortcomings discussed by the scholars and officials are not the fundamental flaws of development according to Yamada, who also posits that some of the problems of the aids such as weak impacts on the sector level and the ownership can be resolved by integrating project aids into sector policy, programs and strategies of the host country (2002). The planning process should be well guided so that the local needs of the recipients are catered for in the project, and this will help in the modification of the donor-driven nature of funds. In addition, to ensure that there are overall policies, institutional and economic environments under which projects operate, so as to ensure that the projects are effective. SWAPs and budgetary supports can be used to sort out these constraints.

Another benefit that can be achieved by the recipient country is the transfer of technology from the donor country. Exposure to different countries will present an opportunity to the host country to various technologies and processes, because every donor might have different ideas in the development process, know-how, different process of fostering technology and which would benefit the host countries since they can acquire new ideas.

The problems that exist in this case is the over-reliance on long-term resident expatriate advisers, massive market distortions in the market of technical cooperation and failure of the expert-counterpart model, in addition to failures in the emphasis on training (Berg, 1993; qtd. in Yamada, 2002).

The problem with inefficient training modalities may delay the transfer of techniques from these expatriates. African countries continue to be faced with low technological know-how and expertise. This means that they have not been able to invest in new technologies and ventures that require high-level of technical know-how. This place them at a compromise because even technological transfer at donor funding for some of these projects would be faster if they were better placed in terms of technological resources and know-how. In addition, long presence of the expatriates may not be unavoidable due to this implication.

Another benefit that can accrue from donor funding is the solution for specific problems through donor innovation. These donors can initiate pilot projects that demand a lot of risk while undertaking and the host countries can then replicate them (Healey and Killick, 2000). The shortage to funding for these projects which may have other attached benefits, by African countries places the donors as the best targets for the sources of these funding.

In conclusion, donor funding can be harmful if left to control the political will, economic decisions and other things for the recipient country. This is a likely position because donor funding are usually seen as defining cold or warm relationship if they are unavailable or not respectively (levels also matter in this case). In addition, donor aids seem to be more justified on the conditions of dire need where countries do not have a necessary option.

A country for example may have undergone a period of war and therefore may have its structures completely disrupted and reforms may be necessary to bring normalcy. Where these conditions exist, countries should have modalities under which the funds must operate to ensure domestic ownership of projects and increment of the impact on local sectors. Other conditions which can justify the donor funding include high poverty levels where the involved government does not have an option.

Donor aids cannot be justified under conditions which favor legitimating corrupt regime, apt one and irresponsible government. Over-reliance of donor funds can be eliminated or minimized when the funds are used to finance projects that will substitute the donor funds through generation of necessary incomes.

References and Biography

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