Foreign Aid Undermines African Democracy and Economic Reform

Case of Uganda demonstrates the unintended consequences of Western help

July 12, 2006

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WASHINGTON – One year after G8 leaders promised substantial Western help for Africa, Andrew Mwenda, a prominent African opinion leader, has this advice for the G8 as it meets in St. Petersburg later this week: stop the foreign aid. Aid in sub-Saharan Africa is producing counterproductive results, reducing democratic accountability, delaying needed reforms and enabling governments to remain highly indebted, according to his study released today by the Cato Institute.

In “Foreign Aid and the Weakening of Democratic Accountability in Uganda,” Mwenda calls into question the effects of foreign aid and debt relief in a country widely considered to be among the most successful aid recipients in Africa.

“Most of Africa’s problems are internal, not external, and concern domestic policies and institutions,” writes Mwenda, the political editor of the Daily Monitor, a newspaper in Kampala, Uganda. “Until those internal problems are addressed, no amount of Western assistance will bring Africa out of poverty. In fact, Western assistance could postpone much-needed reforms in the way that African countries are governed.”

Mwenda argues that foreign aid, which makes up 50 percent of the Ugandan government’s budget, provides the government with an unearned source of revenue. When African governments look for revenue in the pockets of international donors, they do not feel the need to pursue economic policies that lead to economic growth. Moreover, they are not forced to strike political compromises with domestic constituencies that would, in the long run, lead to more government accountability.

Debt relief can lead to further increases in debt and does not address the problem of government waste. For example, following debt relief in 1998, the Ugandan government bought a private jet for the president that cost US$35 million. Debt relief has also allowed the government to borrow still more, remain heavily indebted, and significantly increase political patronage.

“Throwing money at governments is certainly not the right way to make them fiscally prudent,” says the author. “Uganda’s experience is important because it demonstrates the weakness of the arguments for more aid and debt forgiveness.”

When looking for the money needed to pay for policies that improve the welfare of the citizens, governments should listen to domestic constituencies that include the private sector and put into place policies that expand output.  “Increased output, combined with trade liberalization, allows producers to sell their goods abroad and become more prosperous in the process,” concludes Mwenda.

Foreign Policy Briefing Paper no. 88