The term foreign aid refers to any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant, or loan. While foreign aid is commonly thought of as capital, it can also include food, supplies, and services such as humanitarian and military aid. Broader definitions of aid encompass assistance transferred by religious organizations, non-governmental organizations (NGOs), and foundations.
Key Takeaways
- Foreign aid is any type of assistance voluntarily transferred from one country to another, in forms including gifts, grants, or loans.
- Aid can be provided through capital, food, supplies, medical and humanitarian services, military assistance, education, and infrastructure building.
- Developed nations often provide aid to developing nations following natural disasters, during conflicts, or during economic crises.
- The United Nations encourages advanced countries to spend at least 0.7% of their gross national income on international aid.
- The United States is notably generous, as recognized by the Organisation for Economic Co-operation and Development (OECD).
Types and Forms of Foreign Aid
Foreign aid is assistance that a government provides to another nation, usually from developed to developing countries. The aid can be as diverse as:
- Money
- Food and supplies
- Medical assistance including doctors and supplies
- Humanitarian aid such as relief workers
- Training services including agricultural training
- Health care support
- Educational services
- Infrastructure development assistance
- Peacebuilding activities
Agreements and Distribution
Governments typically form agreements detailing how aid will be delivered and utilized. For example, a developed nation may offer grants for post-disaster recovery or support during conflicts. Alternatively, aid might come as loans with favorable repayment terms for allied nations experiencing economic hardship.
Concerned about where foreign aid goes? A small portion is directed to federal governments, with most being allocated to non-profits, NGOs, and other organizations.
Global Contributions and Statistics
In 2020, the OECD reported that member countries contributed a record $161.2 billion in international aid. This included:
- $158 billion in capital grants and loans, with $12 billion addressing COVID-19 relief
- $1.3 billion aimed at private sector growth initiatives
- $1.9 billion in loans and equity for private companies
The top five donors in 2020 were:
- United States: $35.5 billion
- Germany: $28.4 billion
- United Kingdom: $18.6 billion
- Japan: $16.3 billion
- France: $14.1 billion
The UN advocates that economically advanced countries contribute at least 0.7% of their gross national income to international aid. While only a few countries, like Turkey and Sweden, met this target in 2020, the average contribution was 0.3% among member nations.
Geographic and Fiscal Allocation
According to Security Assistance Monitor, regions like the Middle East and North Africa received the most assistance, followed by Sub-Saharan Africa. The top recipients of U.S. foreign aid in 2020 included:
- Israel
- Jordan
- Egypt
- Tanzania
- Uganda
Special Considerations
Estimates on foreign aid can vary due to the different agencies, funding methods, and aid categories involved. For instance, the Congressional Research Service noted that the U.S. spent $44.12 billion in foreign aid during the 2020 fiscal year, constituting 1% of the total federal budget.
Aid can be supplied directly by governments or through agencies like the United States Agency for International Development (USAID), which handles civilian aid across various sectors including education, health, agriculture, and human rights.
Historical Context of Foreign Aid
Foreign aid has historical roots, notably in military assistance during conflicts like the American Revolution. Significant U.S. foreign aid efforts began during World War II with programs such as Lend-Lease and contributions to the United Nations Relief and Rehabilitation Administration.
Post-World War II, the Marshall Plan notably provided $13 billion to European nations for post-war recovery. The Mutual Security Act of 1951 authorized around $7.5 billion annually for foreign aid, approximately 2.2% of the U.S. GDP at the time.
Related Terms: grants, capital, NGOs, money, health care, infrastructure, private sector, equity, government assistance.
References
- OECD. “COVID-19 spending helped to lift foreign aid to an all-time high in 2020 Detailed Note”.
- Inter-Agency Task Force on Financing for Development. “Official Development Assistance”.
- OECD. “Aid by DAC members increases in 2019 with more aid to the poorest countries”.
- Concern Worldwide U.S. “Foreign Aid by Country”.
- Congressional Research Service. “Foreign Assistance: An Introduction to U.S. Programs and Policy”.
- USAID. “What We Do”.
