Foreign aid does more harm than good

As more subsidies are provided, the economic gap between developed and less developed countries continues to widen. Foreign aid presents more challenges than benefits to the recipients of these aids. The monetary aid and services given to less developed countries lead to increased dependency, corruption, increased debt and reduced trade and donors’s influence. For over a century, developed countries have been giving grants to the less developed country which have had a minimal impact in regard to poverty eradication. Arguably, foreign aid has brought many problems than solutions with regards to economic growth. Foreign aid causes more harm through increased corruption. According to Kim (2016), foreign aid fuels rampant corruption in the recipient countries. The monetary aid and services meant to stimulate economic development in developing countries yield up unnecessary bureaucracies in the developing country governments and donor-funded nongovernmental institutions.

The governments and NGOs, in turn, serve as units of corruption plundering the aids and little development. Also, the grants may be utilized by recipient countries for personal gains and investing in low-priority projects. Competition levels in the free market are cut for the goods and services to be traded. Firms that engage in trade are also likely to increase import costs since the recipient countries are expected to imports their products. When foreign aid is offered in the form of tied aid, it serves as a subsidy for local firms. By requiring an import, the trade markets are distorted since the foreign aid is perceived as a tool to facilitate trade. Donors of foreign aid can take advantage of the recipient countries to get involved with governing.

The outcome of this is economy deterioration and widening of the income gap between developed and developing countries. Foreign aid lead to increased poverty. While it is believed that foreign aid helps in the alleviation of poverty in developing countries, it subjects these economies to continued poverty due to overreliance on donations. In many instances, foreign assistance is given to politically porous countries with corrupt leaders. In such a case, the resources are channeled into private pockets (Smillie, 2017). However, this is a carefully choreographed phenomenon to ensure the cost of raw material from the recipient country is low and exporting finished products is high. This means that almost all the proceeds from the aid given are channeled back to the donor country.