In the past, foreign aid was the supplication of military men at war times, but the contemporary concept was first put into action in the 18th century, during colonization. It was the time when colonies were being provided large sums of money by their mother countries to build better infrastructure in hopes of better economic outputs.

This foreign aid culture flourished and has led this article to discuss three countries namely India, Egypt and Nigeria which have shown significant growth from contributions of foreign aid. Here is how foreign aid has reduced poverty in the three countries.

How Foreign Aid is Important

In the 21st century, foreign aid has become a common phrase. It is a transfer of capital goods or services from a country or international body to another country with the aim to aid in the economic, military or humanitarian sector.

According to research by UNU-WIDER, if a country consistently receives aid equivalent to approximately 10% of its national income annually for more than a generation, it can expect its average growth rate to increase by approximately one percentage point compared to what it would have been without such aid. This highlights the significant positive impact that sustained foreign aid can have on economic progress in recipient nations.

Furthermore, this evidence strongly supports the idea that foreign aid has the potential to foster economic development in developing countries over the long term.

India, Egypt and Nigeria are three of many countries receiving foreign aid that have seen growth over time. The statistics from these countries have demonstrated that foreign aid has reduced poverty and stimulated progress in the economy. 

India 

India is a global partner of USAID. By forging partnerships with private and public stakeholders, it has helped in the expansion of financial and human resources in India. As these investments grow, the opportunities for entrepreneurship and innovation pave the way in Indian industries and business sectors. 

Consequently, in the year 2022, India achieved the distinction of being one of the world’s fastest-growing economies, even in the face of substantial challenges within the global economic landscape. In the fiscal year 2022-2023, India’s real GDP experienced robust growth, estimated at approximately 6.9%.

Egypt

Egypt has built a fair economy with substantial growth over the years. It has received foreign aid from USAID for four decades, accounting for up to $30 billion. The results have been fairly significant. 

It has helped bring clean water and wastewater services to 25 million Egyptians. In the health sector, aid has eliminated polio and reduced child mortality by 80% and maternal mortality by 78%. Education prospects for the future generation were also recognized, which led to the setting up of 2,000 schools with a special focus on gender equality. Electricity and telecom services increased across the country, helping to create hundreds of thousands of jobs.

Nigeria

Nigeria is receiving $1.3 billion as of 2023. It is the largest country in the subcontinent of Africa and it houses 96 million people who live on less than $1.90 per day. The humanitarian need of the Nigerian people is vital. Even though macroeconomic rigidities have limited growth with important sectors like agriculture receiving less share of foreign aid, the health sector has prospered under foreign aid.

Health is regarded as a vital conduit for enhancing the human capital foundation of an economy, acting as a cornerstone for bolstering productivity and fostering prosperity. Foreign health aid from developed nations such as the U.S., U.K. and France has contributed to Nigeria’s public health which helped address its economic woes as well.

Looking Ahead

Foreign aid has reduced poverty in India, Egypt and Nigeria successfully. Similar efforts could make a difference in other parts of the world as well.

– Asra Mairaj
Photo: Flickr