Foreign Aid

Foreign aid is the flow of financial and other resources from richer countries to poorer ones. Foreign aid is also known as development assistance, development aid, or development cooperation. Financial aid can take many different forms such as gifts in kind, grants, and cheap loans. Transfer of resources can also take the form of expertise and equipment to needy countries. Aid may be given for a variety of reasons, including humanitarian objectives (for example, to help victims of natural or man-made disasters), promotion of economic development, or political and strategic reasons.

Aid may be bilateral, that is, disbursed from one country to another, or multilateral, which is given through an international organization such as the World Bank or United Nations agencies. Multilateral aid may also be given by regional entities such as the European Union or consortiums like the Organization for Petroleum Exporting Countries, comprising shared efforts on the part of several nations.

As well as publicly funded aid, nongovernmental organizations, which include emergency relief organizations and private and volunteer aid agencies (for example, OXFAM, CARE, Doctors Without Borders, and organizations operating under the auspices of religious bodies), provide assistance to poorer countries worldwide. Since poverty encompasses different dimensions of human deprivation (including nutrition, shelter, health, education, and security), foreign aid from various sources, and in its many different forms, plays a significant role in mitigating the effects of poverty around the globe.

Most industrialized countries coordinate their aid efforts through the Development Assistance Committee (DAC) of the Organization for Economic Co-opera-tion and Development (OECD), created in 1961 to improve the effectiveness of its members’ aid endeavors. The DAC annual report entitled “Development Co-operation” and the DAC website present a comprehensive overview of the aid flows. (The annual publication The Reality of Aid conducts an independent critical assessment of the DAC report.) Albeit far less significant, other bilateral aid donors include non-DAC countries such as the Czech Republic, Hungary, Iceland, Poland, and rich Arab states like Kuwait and Saudi Arabia. In addition, a few countries, like China and Israel, are in the curious position of being both donors and recipients of aid.