Foreign Aid in South Asia examines the individual South Asian country experience in dealing with foreign aid. The articles in this book show that the effectiveness of foreign aid as a developmental tool over the last few decades has been mixed, and that the Paris Declaration of 2005 has brought about some improvement in aid ownership, harmonization, mainstreaming, utilization, etc. The book examines how emerging as well as less developed South Asian economies are adapting to these developments in the context of security issues, post-conflict rehabilitation/reconstruction, and so on.
The book provides many lessons for designing an international framework for aid or international aid architecture through case studies, highlighting the future policy priorities for that country. For the very first time, focus is laid on Bhutan, Maldives and Afghanistan—the three least-documented countries in the region—besides discussing about India, Pakistan, Bangladesh, Sri Lanka and Nepal.
Foreign aid in developing economies has become an indispensable source of financing economic growth and development. The narrow fiscal space and low levels of foreign exchange earnings imply less financing for infrastructure and social sector development. Successful aid experiences suggest countries achieving higher human capital growth, faster capital accumulation and improved welfare levels (Chowdhury and Garonna, 2007).
Critics of the existing aid regime have highlighted negative implications of foreign aid which in many countries gets diverted to non-development expenditures and servicing of debt overhang. Furthermore, political instability, frequent changes in policies, misaligned public sector priorities and inefficiency of institutions neutralizes the effect of aid on growth, thereby having less than expected impact on poverty reduction. The study on sources of ineffectiveness of aid has ...