Foreign aid refers to the money, goods, or services that governments and private organizations give to assist other nations and their people. Both private groups and governments give aid to help less developed countries fight poverty, disease, and other problems. Since the end of World War II in 1945, foreign aid has been an important part of foreign policy for a large number of nations.
Governments give foreign aid for three main purposes: (1) to promote security and stability; (2) to improve economic conditions; and (3) to achieve political objectives, including humanitarian goals. Nations giving aid may try to strengthen their own national defenses by strengthening friendly or neutral governments. They may also give aid to create or maintain trade and investment ties with other nations. And when they give aid, they usually expect the receiving nations to support, or at least not oppose, their political policies.
Kinds of foreign aid
Foreign aid takes many forms. It may be packages of food or clothing for needy people, or volunteers working in villages. It could be technicians who teach others such things as modern farming methods or how to operate heavy construction machinery. Foreign aid could also take the form of long-term loans to help less developed countries build roads and power plants.
Foreign aid includes money, supplies, and technical assistance aimed at helping another country build up its economic or military power. But foreign aid does not include military forces sent to help another country. Nor does it include international trade, private international investment, or diplomatic efforts to help other countries.
Private aid is offered by voluntary nongovernment organizations, such as CARE and the Red Cross. Governments give official aid. Official aid given by one country to another is called bilateral aid. Aid given by a group of countries through the United Nations (UN) or other institutions is called multilateral aid.
United States aid programs
Large-scale foreign aid began during World War II (1939-1945). From the early 1940’s to the mid-1960’s, the United States gave or lent about $140 billion in foreign aid. At one time or another, almost every country in the world has received U.S. aid. Since World War II, about a third of all U.S. aid has gone to help other nations build up their armed forces. The rest has gone to teach people new skills, to provide emergency aid for people who lacked food or homes, and to build up national wealth and income in poor countries. Changes in types of aid and in the countries receiving aid reflect changes in U.S. national interests since 1940.
World War II aid.
From 1940 through 1945, the United States gave over $50 billion in supplies and equipment to its allies, especially the United Kingdom and the Soviet Union. It gave much of this aid through the Lend-Lease Program. The United States also started a technical and development assistance program for Latin America and gave funds to war relief programs.
Relief and reconstruction.
One of the most pressing needs at the end of World War II was to provide food and shelter for millions of people in Europe and Asia. Another was to help the people rebuild their war-torn countries. The United Nations Relief and Rehabilitation Administration (UNRRA), an organization financed largely by U.S. grants, helped meet these needs. So did U.S. loans to the United Kingdom and other nations. But these were only temporary measures. In 1948, the United States began the first broad reconstruction program, the Marshall Plan (European Recovery Program). The plan gave the countries of Western Europe about $13 billion for rebuilding over a period of four years.
Economic development and mutual security.
After the Marshall Plan, U.S. interests turned to promoting the economic development and military security of developing countries in Africa, Asia, and Latin America. In 1950, the U.S. Congress authorized $35 million for President Harry S. Truman’s proposed Point Four Program to give technical assistance to these countries.
The threat of Communism changed the emphasis in foreign aid. Americans were concerned about the Communist take-over in China in 1949, the Korean War in the 1950’s, and increasing Cold War tensions between the United States and the Soviet Union. To stop the spread of Communism, the United States helped found the North Atlantic Treaty Organization (NATO) and pledged military aid to NATO members. It gave military and economic aid to developing countries facing Soviet or Chinese pressure. These countries included Greece, Laos, South Korea, South Vietnam, Taiwan, and Turkey. The United States also gave mutual security aid to India, Pakistan, and other less developed countries it considered to be of major political importance.
In the 1960’s, Presidents John F. Kennedy and Lyndon B. Johnson strongly supported technical assistance and economic development programs. In 1961, Congress established the Agency for International Development (AID) to administer all U.S. bilateral aid programs, and Kennedy established the Peace Corps. Thousands of Peace Corps volunteers have lived and worked with people in various countries to help them improve their living conditions. In 1961, the United States and 19 Latin American countries formed the Alliance for Progress to promote economic development and social reform in Latin America. In addition, the Food for Peace Program, set up in 1954, provided large food shipments to needy nations throughout the 1960’s.
In the early 1970’s, the United States reduced its foreign aid program. Public support for foreign aid had weakened, and the United States felt it needed the money more for military and domestic programs. In the mid-1970’s, U.S. foreign aid began to rise again, especially to Egypt and Israel. But it declined again in the 1990’s, following the breakup of the Soviet Union.
Recent developments.
In the early 2000’s, the United States continued to provide aid to Egypt and Israel. It also assisted many nations in their efforts to fight terrorism and to stop the flow of illegal drugs. After the U.S. invasion of Iraq and the fall of the government of Saddam Hussein in 2003, the United States contributed large amounts of aid for the rebuilding of Iraq.
Other countries’ aid programs
Other nations besides the United States give economic aid to less developed countries. Japan gives much of its aid to other Asian nations. It lends money to China, Myanmar, Vietnam, and other countries for development projects. Japan also supplies money and technical aid to such Pacific Island nations as Fiji, Papua New Guinea, and Samoa. France has given much to French overseas territories and to its former colonies in Africa. Belgium, the United Kingdom, and other former colonial powers also give aid to their former colonies.
The Soviet Union, before it broke up in 1991, gave large amounts of military and economic aid to several countries, including Afghanistan, Cuba, Egypt, India, North Korea, and Vietnam. Because of Cold War tensions, the Soviet Union used the aid largely for security purposes. The aid declined in the 1970’s and was cut drastically in the 1980’s, as the Soviet Union experienced economic problems.
Many countries use foreign aid to promote international trade and to foster cultural or diplomatic ties . France has been a major source of technical assistance, particularly to countries in Africa. Belgium, the United Kingdom, Germany, and Italy also have supplied much technical assistance.
A number of countries coordinate their bilateral aid through the Organisation for Economic Co-operation and Development (OECD). The countries providing aid often negotiate as a group with aid-receiving countries to determine the size and use of aid programs.
Multilateral aid programs
About a fourth of all official foreign aid is multilateral. A large part of this aid is channeled through the United Nations and various United Nations agencies. Most multilateral aid goes for development and technical assistance, and disaster relief. Multilateral agencies do not offer military aid. However, the aid they do offer may release for military use funds that had been reserved for other projects.
Technical assistance and relief.
United Nations technical assistance, refugee, and relief programs are financed mostly by contributions from UN member governments. A large share of these contributions goes to the United Nations Development Programme (UNDP). The UNDP is responsible for selecting aid projects and distributing funds to agencies to carry out the projects. Each agency also receives funds directly from member countries.
A number of agencies carry out much of the UN’s technical assistance work in less developed countries. The Food and Agriculture Organization (FAO) of the United Nations promotes agricultural development. The United Nations Educational, Scientific and Cultural Organization (UNESCO) gives educational and scientific assistance. The World Health Organization (WHO) helps countries improve their health services. The United Nations Children’s Fund (UNICEF) helps fight children’s diseases, and aids needy children and mothers. The International Labour Organization (ILO) conducts labor training programs. Other agencies also give technical assistance to less developed countries. The United Nations Industrial Development Organization (UNIDO) was formed in 1966 to give advice on industrial development. Other agencies aid refugees.
The United Nations Conference on Trade and Development (UNCTAD) does not give aid. But it serves as a forum for its members to frame aid and trade policies to benefit developing countries. For more information on most of the UN’s specialized agencies, see United Nations (Specialized agencies).
Worldwide lending programs
help less developed countries finance development projects. The International Bank for Reconstruction and Development—commonly called the World Bank)—makes long-term loans to member governments at reasonable interest rates. The International Development Association (IDA), a World Bank affiliate, makes loans to the least developed member countries, allowing 50 years to repay with no interest. Another World Bank affiliate, the International Finance Corporation (IFC), invests in private enterprises in less developed countries.
Regional development programs
aid poor countries in particular areas. There are four major regional development banks. The Inter-American Development Bank (IDB), established in 1959, makes development loans to governments and private firms in Latin America. The African Development Bank (AfDB), established in 1964, lends money to promote development in Africa. The Asian Development Bank (ADB), established in 1966, makes development loans in Asia and the Pacific. The European Bank for Reconstruction and Development (EBRD), established in 1991, lends funds mainly to private firms in eastern Europe and central Asia, with the goal of building market economies in those regions.
Each of the four major regional development banks is owned and financed by dozens of member countries. The members include the poor nations that borrow from the bank as well as wealthy donor nations within and outside the region. The banks fund their loans by borrowing on international capital markets and by collecting direct contributions from donor nations.
Several other multilateral banks and funds lend to poor countries. These institutions include the European Investment Bank, which is the European Union’s long-term lending arm; the Islamic Development Bank, which finances projects in Islamic countries; and the OPEC Fund for International Development, which is overseen by the Organization of the Petroleum Exporting Countries (OPEC). In addition, there are smaller development banks that serve the Andean region, the Caribbean, Central America, and regions within Africa.
