Even IMF Warned That Aid Doesn’t Work
In 2005, the International Monetary Fund warned that governments, donors, campaigners and pop stars need to be far more modest in their claims that increased aid will solve Africa’s problems. In a report titled “Aid Will Not Lift Growth in Africa,” the IMF cautioned that “we need to be careful given the chequered history of aid, that we do not place more hopes on aid as an instrument of development than it is capable of delivering.” The report studied duration, type of donor and governance record of recipient and concluded that aid did not boost growth. But despite such comments, no serious efforts have been made to wean Africa off this debilitating drug.
More Aid Hampers Growth
Rather than pumping aid to African nations, the IMF suggested that governments focus on trading with Africa instead. Raghuram Rajan, the fund’s chief economist and co-author of the reports, and Arvind Subramanian, head of macroeconomic studies, argued that aid contributes to a country’s rising exchange rate, which hampers growth. In addition, increased aid contributes to poor productivity by depressing exports, the IMF research shows.
