What is Foreign Aid?

Foreign aid is money that is voluntarily transferred by one country to another, which can be in the form of gifts, grants, or loans. The broader definition of assistance includes money sent across borders by religious organizations, non-governmental organizations (NGOs) and foundations. Some argue that remissions should be included, but they are rarely considered as assistance.

Advantages and Disadvantages of Overseas Aid

Favorable economic reasons for providing foreign aid to other countries:

  • Humanitarian reasons
  • Improve the international image of the country
  • Build positive working relationships with other governments
  • To promote conditions for peace and stability. Because many governments truly believe that the recipient country will be safer.

An adverse economic argument if providing foreign assistance:

  • According to critics, foreign aid does not encourage faster growth, but can withstand it by replacing domestic savings and investment .
  • The growth of the modern sector is the focus of assistance. As a result, it increases the gap in living standards between the rich and the poor in Third World countries.
  • If the assistance provided is related to unproductive fields or old technology, it will have an impact on increasing inflation in the country.
  • The most prominent objection is that donor countries interfere with the economic and political activities of the recipient country.


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