Perspectives on the Foreign Aid Mandate

The paper presents a rigorous definition of foreign aid as a concessional resource transfer from advanced to developing countries. The alleged rich country and rich people bias of aid is reviewed and the rationale for aid both from donor's and recipient's perspectives is analysed. Whilst the donor aims to increase its leverage, the contribution aid makes to development of recipient is marginal because aid breeds a cargo cult mentality and also crowds-out both foreign and domestic investment in the recipient nation. The back-lash against foreign aid and the response of aid protagonists is also debated here. The measurement and performance of the aid/GNP and its limitations are examined and rectified. The mechanisms for revitalising the aid mandate that seems to suffer from aid fatigue and cyclical downturns in donor countries are also examined. The study suggests that the joint programming of aid through equal partnership of donors and recipients will increase both the effectiveness and absorptive capacity of aid by recipient nations