Official Development Assistance (ODA) and Economic Growth in Afghanistan

The extent to which foreign aid has a positive impact on economic recovery and development of conflict-affected countries remains controversial. In 1987 Paul Mosley noted that a positive impact of foreign aid is difficult to identify (Mosley 1987). This research paper has two main objectives. First, we attempt to provide a balanced assessment of the aid-growth literature. Second, attention is given to empirical data. Using these data, we realize that we make assumptions, which are highly debatable, both in theory and in practice. In this paper the aid-growth debate is framed in terms of potential and real outcomes and do we take information obtained from program evaluation through interviews in Afghanistan as valuable data for our assumptions and recommendations. The Official Development Assistance (ODA) and its impact on economic growth is evaluated for a selected group of countries, this provides the background for a thorough investigation of the ODA management practices of the bilateral donors, multilateral donor institutions and NGOs. Corruption is found to be of less influential in the aid-growth equation. The Afghanistan case study reveals that for various reasons investment in infrastructure and production was not sufficient to consider ODA a success. Data in other conflictaffected countries also suggest that import of capital goods and intermediate goods and the construction of paved roads may have been the reason for limited economic growth recovery. Therefore, a focus on investment in infrastructure and production are recommended over politically engineered short-term projects satisfying the needs of foreign donors.