For a long time, the issue of foreign aid has been debated. Many proponents of foreign aid have argued that foreign aid has a lot of humanitarian as well as economic benefits to the receivers. They point out that foreign aid is mostly targeted towards the developing economies where the population cannot afford even the basic needs. The argument is that foreign aid has been used to promote internalization and globalization. This has encouraged more countries both developed and developing to donate towards humanitarian crises (Alesina & Dollar, 2002). However, what these researchers fail to say is whether the donors benefit more from giving the aid. This paper aims at exploring whether the foreign aid is more beneficial to donors than the receivers.
Firstly, research has indicated that foreign aid goes hand in hand with tied aid. This means that foreign aid creates strings that are attached to the aid hence requiring receiving countries to meet some conditions. Some opponents of foreign aid have argued that foreign aid has been used to exploit the receiving countries where some have been even forced to trade with donating countries. In some cases, the donor countries have required the countries receiving the aid to hire experts from the donor countries to implement the projects. This has compelled the receiving countries to fork out more money to pay these expatriates (Djankov, Montalvo, & Reynal-Querol, 2006a).
Lastly, foreign aid has been used by donor countries as a competition mechanism to win the hearts of receiving countries. An example is where USA and British governments have repeatedly warned Africa against warning up for China as a trading partner. The argument has been that China is using aid to Africa as a way of toppling US and Europe from doing business with Africa. Many have argued that the abundance of natural resources in Africa is the magnetic force pulling China, Europe and the USA towards Africa. The result is the second scramble and partition for Africa (Younas, 2008).
In conclusion, foreign aid has benefited both donors and recipients. The central purpose is to promote internalization and globalization. However, the donating countries have benefited more by giving aid than the receiving countries.