Foreign Aid Policies in Afghanistan


Political analysts on the global platform have increasingly questioned the motive of aid meant for development and growth purposes to the less developing countries and countries on recovery paths. The questioning comes after the revelation by the World Bank and the international monetary fund over the colossal sums of money channeled to these poor countries from the developed countries. Such aid is channeled directly to the recipient countries form the donor countries or through the world band or the IMF or other global financial organizations and more so organs of the United Nations (UN) (Mulumukazi, 2006).

One of the best targets preferred by these analysts is Afghanistan. Following the US and allies invasion of the country over terrorism claims, the US government and her allies vowed to reconstruct the country after near total ruin of the country by the allied forces. Foreign aid thus has been flowing form all direction in a bid to establish a strong financial system and government that will stand on its own and fight terrorists who prefer to make the country as their hide out base. But questions have been raised over whether the motive behind the aid is genuine or is there something we need to know?

Habib (2007) says that foreign aid has a negative effect on an economy in the long run. In view of Afghanistan as a case study, this paper critically analyzes the impact of foreign aid on the country and assesses the suitability of it put against Bethany’s assumption that foreign aid has a negative effect on the economic and political system of a sovereign country. In addition we look at the alternatives to aid and how effective they can be and hence give recommendations in the context of Afghanistan.

Historical background

Located in the Middle East neighboring Iraq and Turkey, the hilly country was formerly one of the high oil producers and exporters in the region. Poor governance, ethnicity, interethnic wars and the rugged terrain contributed highly to the presence of Muslim extremist and terrorist groupings in the region (Rahab, 2003). After the 1998 terrorists bombing of US embassies in Kenya and Tanzania in East Africa, a terrorist group based in Afghanistan by the name Al Qaeda claimed responsibility.

In 2000, an attack on the world trade center in the US proved to be the ultimate limit. To avert further attacks on US interests across the globe, with the backing of the UN, the US and her allies combined forces to hunt down the terrorist group headed by one Osama bin Laden. The attack was also an attack to give the Afghan people freedom from the Taliban accused of bad governance and human atrocities (Latifa, 2008).

The combined attack on the country left the country in a very bad economic position forcing the allies to pledge to fund the reconstruction of the country to revert it to its earlier position. Subsequently, the defeat and ousting of the Taliban government saw the setting up of an interim government to manage the country. As such, foreign aid was almost the only source of government revenue in carrying out the reconstruction process (Mulumukazi 2006).

Questions have been raised over the importance of the attack since the motive of going to war as to capture the leader of the terrorist group has failed. Again, terrorism has not scaled down either. We may ask, is the criticism over the funding of Afghanistan prompted by the failure to accomplish the initial mission of the war?

From this we learn that the war had two primary objectives;

  • Promote freedom.
  • Fight terror.

The resultant aid to the interim government was also aimed at empowering the government to promote freedom and fight terror (Bashir and Moktar, 2006).

NATO as the main arm through which the US sought to attack Afghanistan has taken a backseat in funding the reconstruction process in the country and in its place are the World Bank and the IMF. European allies of the US have mildly condemned the approach taken by the US in channeling aid to Afghanistan. A report by the European Council on Foreign Relations indicates that “While Americans tend to treat a political problem as a military one, Europeans have lagged behind the US in terms of financial and military commitments, and have even failed to co-ordinate their own activities.” (Mosad, 2008).

The European Council accuses the Bush administration of allocation a lot of money in her foreign military budget without putting in place a proper policy framework to guide the spending of the money. Their fear is that the money might be used in other projects that may undermine the actual cause of the funding (Mosad, 2008).

One of the most vocal critics of the manner in which the US dispenses aid to Afghanistan is Germany. According to Latifa (2008), Germany is more interested in offering humanitarian aid in the country noting that the end of the humanitarian crisis existing during the Taliban regime did not end with the fall of the regime. He says that famine and food shortages and more so in the rural areas heavily dependent on agriculture have consistently relied on donor food from the European Union more than from the US. He notes that the current military operations in the country have a significant contribution in the humanitarian crisis. This is because there has been increased mistrust between the local people and the US military forces in the country.

In questioning the forms of aid that Afghanistan deserves, European representatives have oftenly argued that the US is over reliant on guns in dispensing aid. The US on the other hand argues that the European friends lack faith in the war. European members insist that the current problem facing Afghanistan is not military but political. The interim government in the country needs support to stand on its own and run its own internal security operations without the interference of foreign countries.

The policy framework

According to the Afghanistan online magazine, the interim government has very little control of the aid extended to the country. The country’s minister for finance is quoted to have said that the country was in control of only 12% of the donor money making up for US$3.7 billion only of the total US$13 billion donated so far. According to the minister’s statement the country’s minister the donors channels the rest of the funds through their own target projects in the country. The argument behind this idea is to increase accountability and reduce chances of funds embezzlement.

Interestingly, reports, studies and empirical evidence indicate that the funding which started immediately after toppling of the Taliban regime has been largely ineffective. A report by Oxfam shows that 40% of donor aid directed to Afghanistan is redirected back to the donor countries through various ways such as corporate profits, consultant fees and salaries to expatriates working in Afghanistan from those countries. This is made possible by the fact that 90% of Afghanistan’s public spending comes directly from the donors.

Again the report shows that the donors have not lived to their promise by providing the full amount of money they pledged in 2001. All the aid combined together was supposed to amount to around US$25 billion but only US$13 billion has been made available so far. The World Bank as one of the many donors has also not paid in full the amount of US$1.6 billion pledged between 2002 and 2008. The result has been that a combination of inconsistent spending by the donor countries and the redirecting of donor funds to the donor countries is largely contributing to the ineffectiveness of the aid.

Another route taken by donors more so the UN is funding individual sectors of the economy. Agriculture has been the main target to salvage the seven million Afghans facing starvation after two decades of severe fighting which have crippled the agriculture sector. International Centre for Research in the Dry Areas (ICARDA), works in collaboration with the Centro Internacional de Mejoramiento de Maíz y Trigo (CIMMYT), in testing dry resistant seeds to help out farmers in the region in the face of famine and drought. Such a move is aimed at reducing the burden of food aid by the donors.

Aid theories

Politicians and economists have tried to explain why donors use their hard earned taxpayers money on other projects that are not in the eat going to benefit the taxpayer. As such various motives behind the reasons for doing so have been fronted using various theories. The credibility of these theories can be questioned or let to pass depending from which side one decides to view it from i.e. the donor or the recipient.

Development assistance/modernization theory

This theory draws its support from the deficiency model that states that lack of initial capital outlay for investments prohibits development. Donor aid was thus initially aimed at providing the investment money required to jump start an economy in trouble (Thomas, 2008). This was most relevant after the effects of world war two which had countries like Japan seeking donor assistance but are now currently among the top donors. The underlying view behind this model again was that increased government spending will trickle down top the common citizen. Thus industrialization is usually based on nationalization of development projects and all major donor funded projects.

The moral obligation of industrialized and developed nations to the underdeveloped and poor countries through an adopted independent nation’s doctrine is that they should bail out their poor countries as partners in development. Thus the US and other wealthy nations are morally obliged to offer assistance not only to Afghanistan as a poor country, but to all other countries whose economies are underperforming due to the weight of foreign debts.

This ideology was adopted from Aristotle who suggested that nations followed a natural growth pattern just like living things. The same way a living thing is affected by illnesses and diseases and then recover through the assistance of medications and treatment, then wealthy nation scan help poor nations as they are viewed to be “sick” and with due help, they will recover and return to their normal state (Thomas, 2008).

Another modern perspective adopted is that poor countries seeking donor aid have poor market structures that generally inhibit growth and development. Thus the aid extended to these countries and in this context Afghanistan has strings attached in that certain market conditions are put in place. More often than not Mulumukazi (2006), says that the market regulations put in place seek to favor foreign investors from donor countries other than improving the market conditions such that they will favor long term development of the market. Liberalization of markets is a common term used to accompany aid (Habib, 2007).

World Bank theory

This theory is suggested by one Mosad, (2008) in his paper to address the impact of the presence of World Bank as an international lending financial institution at the mercy of the wealthy nations of the world. Established in 1944 together with the sister institution, IMF, World Bank was aimed at financing the reconstruction and development of nations after the Second World War. It aimed at providing loans and donations to countries whose economies had suffered adversely from the effects of the war.

The World Bank has two branches each dealing with a specific task. The two are

  1. The International Bank for Reconstruction and Development (IBRD). This branch handles loans to interested countries that qualify on merit of want or private organizations verified, cleared and guaranteed by their particular home governments. The money lend out earns a commercial interest. Further analysis into the setting of the rates is limited by the scope of this paper.
  2. The International Development Association. This branch also offers loans but on a long term basis and the principal amount earns no commercial interest. It is usually aimed for the poorest countries thus the less developed countries.

Donor countries provide the funds to this body as an alternative of direct funding.

Effects of aid

Pamela and Rudolf (2007) hold the position that long term negatives effects of donor aid outweigh the benefits of it in the long run. They assert that aid can only be used as a temporary alternative in case of a crisis but increased and prolonged aid denies the country the creative mind that it needs in devising its own means to get around their problems. They quote the case of Africa where a majority of the less developed countries (LDC’s) are found in the sub0sahara.

Over the years, donor money to this region has increased constantly but the region is continuously growing poorer even after gulping down billions of donor funds. Their argument is strengthened by the case of Japan. After receiving foreign aid after the Second World War in relatively smaller quantities than some of the countries in Africa are receiving. By 1965, Japan had almost fully recovered economically within that space of twenty years.

Taking the case of Africa, a number of countries have been receiving aid since their independence from colonialism mostly from their former colonial masters. Unfortunately, no single country has made any significant progression on the account of donor funds. Some of the countries making an economic impact and showing ream signs of economic progression mainly rely on natural resources other than donor funds which they also receive.

The authors take cases of Nigeria and South Africa. Though the countries are relatively way ahead in economic terms, their development was not the direct result of donor aid extended to the new governments on attainment of independence. Nigeria owes her progress to increased oil exploration and drilling in the country while South Africa owes her progress to continued diamond and gold mining in the country.

Bashir and Moktar (2006) have issues with aid as a means of initiating economic development and prosperity in poor countries. Their discontent in foreign aid is the number and type of conditions that must be met by the recipient countries if they are to qualify for the aid. A country mentioned adversely here is Kenya. They say that the country has been force d to privatize some of the national companies that the state was running in a bid to earn the much needed revenue. However, some of the state corporations that the Kenyan government has been running make losses and hence retaining them and funding their operations does not make economic sense (Pamela and Rudolf, 2007). Some of these demands made by the donor countries go against the policies and interests of the recipient country.

In a more controversial level, the authors insist that aid has always shown to have ulterior motives other than the mutual humanitarian aspect of being mindful of our brothers and sisters languishing in poverty in other countries. Taking the case of the cold war, political reasons were the main influence on where aid was directed to. Countries allied to the US received a lot of aid to keep their friendship while the same happened to countries allied to the USSR. At the moment, the US is trying hard to establish its presence in the volatile Middle East by acquiring a number of allies. The quicker Afghanistan recovers and stands up on its own, then the US will have gained an additional footing in the area on top of having Israel and Jordan in her pocket (Mosad, 2008)

The failure of the aid policy and recommendations

According to the afghan government, aid extended to the country has been largely ineffective. For one, the government blames it on inconsistent funding with all the donors not having fully submitted their pledged donations. Of the amount submitted also, only a small percentage is under control of the Afghan government. This makes it hard to develop a harmonized policy framework on the road to recovery as there are two government spending units.

Again, the donors have all their priorities wrong. Rahab (2008) says that since 2002, the US government has been spending approximately US$100 million a day on its military operation in the country compared to only US$7 million a day being used in tackling poverty, the most prevalent problem in the country especially in the rural areas where child mortality rates are one of the highest in the world as the people in that area cannot access good health care services.

According to Mosad (2008), allowing more autonomy to the Afghan government in handling the donor money will be the right path for the time being. Being in chare of her people, the government is posed to prioritize the needs of her people and not like the way the US government is doing: spending on the military in Afghan is more than ten times higher than spending on making life for Afghans easier by providing food, healthcare and education (Rahab 2003: Latifa 2008: Mosad 2008)

The donors in Afghanistan have failed to recognize the potential of women in driving on the economic recovery process that everyone is devoted to (Latifa 2008). The author says that empowering of women through equal education opportunities could be the lacking ingredient into placing Afghanistan in a better economic position. Latifa (2008) suggests the use of the same programs that are used in Africa of tying education to food to increase school attendance levels equally for both boy and girls. This she says will ensure a more potent future for the country.

The US military operatives in Afghanistan have often been accused of human atrocities against civilians. This has created a lot of resent from the local Afghan people. They have lost faith in the US as a liberator and see the constant military presence by the US as an intrusion (Habib 2007). As a result, many of the projects funded by the US might not receive the full support of the local people which lead to the general effectiveness on aid. This is especially so given that the Afghan government is based on Islam a concept that the US government has a poor record of understanding.


Afghanistan being a sovereign country should be allowed to run her affairs albeit with a lot of assistance as it is still in its infancy stage. However, taking control of some of the basic functions of a government such as policing and internal security issues denies the country the independence and liberation that the US claims to stand for. If more responsibility was allowed on the Afghan government, then the political will of her people will work magically into bringing back the elusive political and economic stability of the country and bring to an end the humanitarian crisis in the country (Thomas, 2008).


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