Impact of foreign aid on rwanda's socio-economic development as guided by Millennium Development Goal (MDG) 1 “Eradication of extreme poverty and hunger”:case of Gasabo District

2.4.2 Foreign Aid and Economic Development in Sub-Saharan Africa

World Bank records (2000), show that Africa has continued to make progress in many areas. Sixteen out of 47 countries achieved on average more than 4% growth over the last decade. Investment and trade trends have been steady. Net foreign direct investment (FDI) to Africa rose to $6.8 billion in 2001 but was heavily concentrated in oil-exporting countries and South Africa. Africa had the highest returns on FDI, in the world, and the flow of workers? remittances back to

the continent doubled in only two years, reaching $4 billion in 2002. Nevertheless, the continent continues to face enormous development challenges. Half the population lives on less than $1 a day. The share of poor population remains unchanged over the period 1987-1998. This is the region with lowest income per capita and highest population growth. Lack of safe water, HIV and AIDS and political conflicts are the burning issues of the region. Overall GDP growth is roughly 3%, almost equalling to the population growth. Even though the donor community has been providing huge aid amount to this region, its economic performance is still very poor.

As the matter of fact, the aftermath of colonialism is more serious in Africa than anywhere else. Sub-Sahara Africa is especially hindered by its tropical location, high prevalence of malaria, small portion of people living near the coast, and low coastal population density (Gallup, Sachs and Mellinger, 1999). Weak institutions, poor economic endowment, widespread corruption and various ethnic, political and religious conflicts are holding up this region for long time.

Africa is especially vulnerable to terms of trade shocks, famines, political conflicts, drought and floods (Morrisey, 2001). It is found that African nations have aid-to-GNP ratios more than ten times that of Latin America or East Asia, but still suffer inferior economic performance. Ironically, within Africa, countries with poor economic policies have received more aid per capita than those with responsible policies (Graham and O?Hanlon, 2001). In a distorted environment of Africa, if donors just simply provide aid with the same uniformed conditionality like elsewhere, the failure is inevitable. Zambia has received such a huge amount of aid, yet the income per capita is only around US$600, not US$20,000 as expected (World Bank, 1998).

Nigeria, Tanzania may also be examples of failures. Even though there some success stories, namely Botswana, Mauritius, Ghana, Ethiopia, Rwanda, Mali and Uganda, they account for such a small number out of aid recipient countries in the continent. The major cause is that donors do not favour good policy countries and penalize the poor performers. Consequently, the aid dependency is getting more and more serious. Widespread corruption and fungible aid also make the situation worse. Obviously, the question lies not in the quantity of aid but in its effectiveness, which remains ambiguous. As Mushi (1982:09) says about aid in Tanzania, that aid is true developmental only if it lays the foundation for its future rejection?, aid in Sub-Saharan Africa can hardly be called so given the myriad politics around aid which invite greater concern than arouse interest in the positive claims that donors heap on aid. The Arusha Declaration sums up the Tanzanian experience with aid. The Declaration unequivocally warns that it is stupid for Tanzanians to imagine that they would rid themselves of their poverty through foreign financial assistance rather than their own resources?. (ibid: 13).

The message is loud and clear: that foreign aid does not lead to sustainable development as it serves the interests of the donor more than the recipient. However, this does not mean that NGOs and other donor institutions cannot bring anything positive. Many governments acknowledge the significance of donor assistance. For instance the Ethiopian economy is a typical donor economy, so is the economy of Lesotho, Botswana and to some extent Rwanda. The poverty reduction strategies of Lesotho and Botswana (2000, 2000) acknowledge the role that NGOs can play in the entire process; but the point perhaps needs emphasis is that Africa, being the richest continent in terms of resources should eventually desist from aid dependency and that if donors are really modest in their help, they must provide sustainable skills for future self-reliance

otherwise it will be difficult to dispel the conspiracy surrounding donor assistance, more so when Africa is still smarting from colonial oppression by the same samaritans?. A closer look at Rwanda should illustrate the impact of foreign aid in Africa.