foreign aid assignment

What every American should know about US foreign aid

Subscribe to global connection, george ingram george ingram senior fellow - global economy and development , center for sustainable development @gmingramiv.

October 15, 2019

Foreign aid is money, technical assistance, and commodities that the United States provides to other countries in support of a common interest of the U.S. and that country. Opinion polls consistently report that Americans believe foreign aid is about 25% of the federal budget, when it is actually less than 1%. As the world’s wealthiest nation, the U.S. provides more assistance than any other country, but a smaller proportion of its gross national product (GNP) than other wealthy nations. Historically, support for foreign aid has been bipartisan.

A Closer Look

Seventy-five years of American foreign aid has produced more fiction than fact when it comes to how U.S. tax dollars are spent.

As we enter an election cycle, it is important that candidates and voters have a basic understanding of how taxpayer dollars support foreign aid.

What is foreign aid?

Foreign aid is money, technical assistance, and commodities that the United States provides to other countries in support of a common interest of the U.S. and that country. Typically, the support goes either to a government entity or to communities in that country. Such support typically falls into one of three categories: humanitarian assistance for life-saving relief from natural and manmade disasters; development assistance that promotes the economic, social, and political development of countries and communities; and security assistance, which helps strengthen the military and security forces in countries allied with the United States. The relative proportions vary each year, but over time humanitarian assistance accounts for a bit less than one-third of the foreign aid budget, development assistance a bit more than a third, and security assistance about a third. Very little actually is delivered as cash, and most funds for humanitarian and development assistance are provided not to government entities but used for technical assistance and commodities provided by U.S., international, and local organizations.

How much of the federal budget is devoted to foreign aid?

Less than 1%. Opinion polls consistently report that Americans believe foreign aid comprises around 25% of the federal budget. When asked how much it should be, they say about 10%. In fact, at $39.2 billion for fiscal year 2019, foreign aid is less than 1% of the federal budget.

Do other wealthy countries do their fair share?

YES, relative to their economic size. The U.S. provides more assistance than any other country, which as the world’s wealthiest nation, is appropriate. There is a broad international commitment that wealthy countries should provide annually 0.7% of GNP to assist poor countries. Five countries (Norway, Sweden, Luxembourg, Denmark, and the U.K.) exceed that benchmark. The average for all wealthy nations is around 0.3 %. The U.S. ranks near the bottom at below 0.2 %.

Is support for foreign aid partisan or bipartisan?

BIPARTISAN. This is surprising given today’s divisive politics. Historically, Democrats embraced foreign aid more fully than Republicans. Take the Truman administration, which initiated the Marshall Plan. Or, in the 1990s, when votes in Congress on foreign aid spending were close, the appropriations bill garnered more Democratic than Republican votes. Yet every president, Democratic and Republican, until the current occupant of the White House, has been a strong proponent of foreign aid.

In fact, some of the most rapid increases in foreign aid have come during Republican presidencies—the first terms of Ronald Reagan and George W. Bush. Since the creation in the early 2000s of President Bush’s popular and successful signature programs—the Millennium Challenge Corporation, the President’s Emergency Plan for AIDS Relief (PEPFAR), and the President’s Malaria Initiative—foreign aid now also carries a Republican brand and has received overwhelming congressional support from both parties. One needs to look no further for proof of this than the recent bipartisan rejection of proposals by the Trump administration to cut the U.S. international affairs budget by one-third.

Does foreign aid go to corrupt, wasteful governments?

NO. Only about a fifth of U.S. economic assistance goes to governments. In 2018, 21% of U.S. official development assistance went to governments, 20% to non-profit organizations, 34% to multilateral organizations, and 25% elsewhere. Typically, when the U.S. wants to support a country that is ruled by a corrupt, uncooperative, or autocratic government, U.S. assistance goes through private channels—NGOs, other private entities, or multilateral organizations. Accountability of U.S. economic assistance is high—the U.S. imposes stringent, some would say onerous, reporting and accounting requirements on recipients of U.S. assistance, and the office of the U.S. inspector general investigates misuse.

Does foreign aid go to autocratic governments?

LESS SO TODAY. During the Cold War, when foreign aid was often based on the premise that “the enemy of my enemy is my friend” no matter what the nature of the government, some aid did find its way to autocratic governments. That substantially changed in the 1990s following the demise of the Soviet Union. However, there are countries that are at best “semi-democratic” and have autocratic elements but receive U.S. assistance because of strong U.S. security interests in their stability. Further, there is reason to worry that less concern with autocracy is reappearing with the abiding anxiety about terrorism in our post-9/11 era.

Does foreign aid produce concrete results?

YES. The U.S. government requires regular monitoring and reporting on how and whether assistance programs are working, and periodic evaluations of results. There is hard evidence that development and humanitarian programs produce considerable results, less so for programs driven for foreign policy and security purposes. While U.S. assistance is by no means the sole driver, the record of global development results is impressive. These results include:

• Extreme poverty has fallen dramatically over the past 30 years—from 1.9 billion people (36 percent of the world’s population) in 1990 to 592 million (8 percent) in 2019.
• Maternal, infant, and child mortality rates have been cut in half.
• Life expectancy globally rose from 65 years in 1990 to 72 in 2017.
• Smallpox has been defeated; polio eliminated in all but two countries; and deaths from malaria cut in half from 2000 to 2017.
• The U.S. PEPFAR program has saved 17 million lives from HIV/AIDS and enabled 2.4 million babies to be born HIV-free.
• Assistance programs can promote national economic progress and stability, which can make it more viable for citizens to remain at home rather than migrate to other countries.

Does foreign aid benefit the U.S. or foreigners?

BOTH. Foreign aid typically aims to support security as well as the economic, social, and political development of recipient countries and their people. At the same time, such assistance also advances one or all of the following overriding U.S. interests:

• Contributing to U.S. national security by supporting allies in promoting regional and global stability and peace.
• Reflecting the core U.S. value of caring for others in need—providing humanitarian assistance to victims of war, violence, famine, and natural disasters.
• Advancing U.S. and recipient economic interests by building economies and markets.

Do the American people support foreign aid?

YES. While the term “foreign aid” is not universally popular and polling reveals that some feel our foreign policy is overextended, Americans support U.S. active engagement in the world. Polling over several decades shows consistent approval of U.S. assistance efforts, with support particularly strong for purposes such as improving people’s health, helping women and girls, educating children, and helping poor countries develop their economies.

A 2016 poll by the Chicago Council on Global Affairs found that 64% of Americans feel the U.S. should take an active role in international affairs. Seventy-eight percent supported the statement, “the U.S. should coordinate its power with other countries according to shared ideas of what is best for the world as a whole.”

A 2017 poll by the University of Maryland Program for Public Consultation found 8 in 10 respondents favoring humanitarian assistance and two-thirds favoring aid that helps needy countries develop their economies. Two-thirds supported the notion that “the world is so interconnected today, that in the long run, helping Third World countries to develop is in the economic interests of the U.S.” What receives less support is assistance for strategic purposes.

Editor’s note: A version of this piece was originally published by The Ripon Forum.

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Foreign Aid

It is a voluntary transfer of resources from one country to another.

Prior to accepting a position as the Director of Operations Strategy at DJO Global, Manu was a management consultant with  McKinsey  & Company in Houston. He served clients, including presenting directly to C-level executives, in digital, strategy,  M&A , and operations projects.

Manu holds a PHD in Biomedical Engineering from Duke University and a BA in Physics from Cornell University.

Chris currently works as an investment associate with Ascension Ventures, a strategic healthcare venture fund that invests on behalf of thirteen of the nation's leading health systems with $88 billion in combined operating revenue. Previously, Chris served as an investment analyst with New Holland Capital, a hedge fund-of-funds  asset management  firm with $20 billion under management, and as an investment banking analyst in  SunTrust Robinson Humphrey 's Financial Sponsor Group.

Chris graduated Magna Cum Laude from the University of Florida with a Bachelor of Arts in Economics and earned a Master of Finance (MSF) from the Olin School of Business at Washington University in St. Louis.

• What Is Foreign Aid?

Understanding Foreign Aid

• How Foreign Aid Can Be Provided
• Types Of Foreign Aid
• Foreign Aid In Developmental Economics
• Foreign Aid In Economics And Politics
• Measuring The Effectiveness Of Foreign Aid
• Advantages Of Foreign Aid
• Disadvantages Of Foreign Aid

What is Foreign Aid?

Foreign aid or economic assistance is a voluntary transfer of resources from one country to another. Such assistance can be provided in different forms, such as money, food, medical supplies, etc.,

The vast majority of transactions occur from developed/wealthy countries or large International organizations to developing/third-world countries. This can be provided as a donation, grant, or credit facility. The majority of economic aid is created to fulfill multiple goals effectively.

Nations frequently give foreign help to increase their stability and sovereignty. Hence, foreign financial support may be given in exchange for the right to build or utilize army bases abroad or to keep allied governments or nations from being influenced by enemy countries. 

A nation could use foreign aid to further its international and geopolitical objectives, such as increasing access for its ambassadors to foreign leaders, gaining support for its positions within international bodies, or gaining diplomatic recognition.

A foreign assistance program may require professional direction, training, and goods and financial resources. Financial resources can be obtained through concessional loans or grants, such as  export credits .

The most common foreign assistance is Official Development Assistance (ODA), which is given to aid development and poverty alleviation. 

ODA is mostly derived through bilateral donations from one country to another. Some are in the form of loans and are commonly channeled through non-governmental organizations and foreign organizations.

Countries also deploy external assistance to bolster their security. Economic aid can also prevent friendly countries from submitting to hostile governments' authority or paying for the right to build or retain military installations on foreign land.

Foreign assistance can be used to assist a government in achieving its political goals, such as gaining diplomatic recognition, improving respect for its participation in international organizations, or enhancing the accessibility of its diplomats to foreign countries.

International economic assistance can also be used to increase a country's exports and spread its cultural and native goods. Countries commonly send relief to alleviate the suffering caused by man-made or natural disasters such as drought, illness, and war.

It contributes to long-term prosperity, establishing or strengthening political institutions, and resolving a wide range of global challenges such as cancer, terrorism, and other offenses, as well as ecological damage.

Governments may engage in treaties with the countries to whom they transfer help. For example, we can take a look at the Marshall Plan.

The  Marshall Plan  was an American program implemented in 1948 to offer international aid to Western Europe. 

Following the conclusion of WWII, the United States of America transferred approximately $13 billion in economic recovery projects to Western European economies, and, ever since, the United States of America and the western European countries have had good and peaceful relations. 

How Foreign Aid can be Provided

Foreign assistance is primarily provided in the following ways:

Money  is one of the best ways to provide aid as it allows the receiving country to make more fluid decisions on how to overcome their problem with their methods and control—for example, the famous $18 billion  bailout  by the IMF to Ukraine.

Food and Supplies  - There are situations when a country is not economically weak, but there is a high shortage of certain essential food commodities or products. For example, the  wheat shortage in India (1991 Indian Economic Crisis)  and the United States provided India with wheat on loan. 

Health care & medical assistance  - Frequently, in war zones, that country's medical and healthcare facilities are destroyed. Therefore international organizations such as World Health Organisation (WHO) and United Nations Refugee Agency (UNHCR) provide such nations with healthcare aid, medicines, trained doctors, etc. For example, UNHCR provided  Syrian refugees  with $65 million worth of healthcare and medical resources in 2019 due to the rising prices of medical supplies.

Humanitarian & Infrastructure aid  - When a country goes through a natural disaster, it requires relief workers and assistance in rebuilding its infrastructure. For example, in the 2018  Kerala floods  (India), the United Arab Emirates attempted to help India by providing relief workers and resources for rebuilding the infrastructure worth $98 million.

Education  - This encompasses building education systems for below-poverty-line countries so that the government can fare well economically and democratically. For example, the World Bank has provided loans worth $150 million to Chad so that they can improve their education facilities and standards.

Types of Foreign Aid 

Foreign aid is of various types. These are:

1. Tied Aid 

This is a type of international aid in which the recipient country or a group of nations must invest. For example, a developed nation can make a bilateral credit grant to a developing country, but the money must be used on goods and services produced in that country.

For example, China follows this method of economic assistance. They invest in building ports and airports in many countries, and as a result, Chinese corporations own over a hundred ports and airports in 63 countries worldwide.

2. Bilateral Aid

This means that money is given directly from the government of one nation to the government of another. 

Currency devaluation occurs when money moves from a developed country to an emerging economy . Strategic, political, and humanitarian factors drive bilateral aid. This is implemented to foster democratic freedom, financial prosperity, tranquility & project long-term stability. 

For example, in 2022, during Pakistan's major political and economic crisis , the government of the Kingdom of Saudi Arabia directly gave the Pakistan government an $8 billion bilateral loan.  

3. Multilateral Aid

Governments of different countries collectively contribute multilateral aid to international organizations such as the United Nations, World Bank, and International Monetary Fund . These organizations work to alleviate poverty in developing countries. 

For example, World Bank provides an $8 billion education and training facilities package to over 35 countries below the poverty line.

4. Military Aid

Military assistance is an aid used to help a country or its people defend themselves or to assist a developing country in maintaining sovereignty over its territory. 

Many countries receive military support to aid in counterinsurgency battles. For example, military aid can be given to a revolt to help it fight another government.

For example, During the Second World War, the United States of America provided the allied power countries with over $50 billion in military resources, weapons, and troops.

5. Project Aid

Project aid is an aid for building a specific humanitarian project, such as hospitals, schools, old age homes, Special Needs centers, etc.

For example, The UAE government built and opened up two hospitals in Somaliland. This hospital has all those facilities available in a fully equipped hospital, which runs on the Dubai Care donation fund.

Foreign Aid in Developmental Economics

There are two main schools of thought on how effective External International Economic Assistance is.

1. The first School of Thought  

This group feels that state aid is useless and has hurt developing nations over time.

According to this viewpoint, official aid fosters reliance, corruption, and currency overvaluation. It also prohibits countries from taking advantage of global economic possibilities.

Example:  China is one of the greatest single creditor nations in the world. Over the last decade, its loans to low- and middle-income nations have increased by three times, reaching $170 billion by the end of FY 2020.

According to  AidData , China does not reveal half of its financing to developing nations in government debt data. It is frequently allocated to state-owned corporations and banks, joint ventures, or private organizations rather than going directly from the government to the government.

The Chinese government, through its corporations, has lent money to over 40 lower or middle-income countries valued at more than 10% of their GDP , making them fall into a Debt trap.

In the case of Sri Lanka, they acquired more loans from China so that they could pay back its interest. That's one of the reasons why Sri Lanka is going through a major economic crisis.

2. The Second School of Thought 

This group believes that International Economic assistance levels have positively impacted modern geopolitics and that significant increases in such assistance would help eliminate poverty.

For example, United Nations Children's Fund (UNICEF) has invested in building schools and education centers for young children in middle to low-income countries, which has shown a direct increase in the Per Capita Income ( PCI ) of the North African countries.

Foreign Aid in Economics and Politics

Economists are looking into whether aid is helpful in terms of boosting GDP and improving economic results. 

Most of these investigations have attempted to address questions of confounding variables, employing a variety of tools – some more persuasive than others – to address the possibility that slower growth will draw more help.

Many of these researches have looked at nonlinear functional forms and looked at whether there are any relevant connections between assistance and other factors, including literacy, corruption, stable macroeconomic situation, institutional strength, overall strong economic policies, and geography.

Most research has relied on all terrain or cross-sectional data and sought to differentiate between short- and long-term effects. 

Several writers have utilized ' Dutch disease ' related models to examine how much extra aid causes currency overvaluation, poor export performance, and crises.

What is the Dutch Disease model?

The term "Dutch disease" refers to an economic trend in which strong growth in one area of the economy causes a deterioration in other sectors. It is also frequently accompanied by a strong increase in the value of the native currency.

Economists believe that International aid can be supplied as a diplomatic gesture or to reinforce a military alliance.

Various motives for providing foreign aid include:

• Rewarding a government for desirable conduct.
• Extending the donor's cultural influence.
• Providing the infrastructure required by the donor for resource exploitation from the recipient nation.
• Gaining other types of economic access.

International assistance aids in the formation of treaties that lead to long-term mutual obligations that promote peaceful cohabitation between governments of developed nations and governments of middle-income and low-income countries.

Measuring the Effectiveness of Foreign Aid

There is a QuODA Index that measures how effective it is as International Aid and what its utility is.

What is the QuODA Index? Quality of Official Development Assistance Index is a system for ranking 31 donors, 23 nations, and eight multilateral – on four criteria ;

Maximizing efficiency - Donors may increase the effectiveness of their assistance expenditure, or the "better value for money," by making wise decisions about how to divide their funds across various nations and industry sectors and by supporting international public goods .

Fostering institutions - Several institutional processes have been developed for managing development partners' conflicting interests with partner nations, but the preferred course of action is to utilize the systems of partner countries. To address the needs and interests of donors, enhance these institutions.

Reduction of burden - The high expenditures that various donor organizations, each with its agendas and reporting requirements, impose on their partner nations have long been a source of complaint. They have promoted a plan for resource cooperation among donors

Transparency and learning - As an important step toward greater accountability toward one another, partner nations, and their own populations, donors should pledge to be more open. Additionally, transparency serves as a tool for donor coordination and may be utilized to learn from past mistakes and enhance the efficacy of help.

What do the 4 Components of calculating the QuODA Index mean? The four aspects of this study have very little association with each other.

As assistance quality is multifaceted, QuODA does not attempt to create a single factor Index but instead gives data on each of the four components.

This is because the goal is to bring about change, which is dependent on particular QuODA aspects.

"How are donors performing on their pledges to improve assistance quality?" is an issue addressed by QuODA. QuODA does not examine the effectiveness of aid; that is determined by the joint efforts of donors and partner nations.

Instead, it reviews donors' attempts to keep their promises on the aspects of assistance quality that data and experience show contribute to successful help. We focus solely on elements under donor agencies' control with QuODA. 

Advantages of foreign aid

A few of the advantages of foreign aid are:

• In times of crisis, emergency assistance saves lives.
• Aid helps rebuild livelihoods and housing after a disaster. 
• Medical education, medications, and equipment may all aid in improving one's health and living situation.
• Agriculture aid may assist in increasing food production and so improving the quality and amount of food supplied.
• Encouragement of assisted industrial growth can lead to the creation of employment and the improvement of transportation infrastructure.
• International Aid may help countries enhance their natural resources and energy infrastructure.
• Clean water and sanitation projects may enhance people's health and living conditions.

Disadvantages of foreign aid

Apart from the mentioned advantages, a few of the disadvantages are:

• Assistance may enhance reliance on donor nations. 
• Aid is sometimes a debt, not a gift, and impoverished nations may struggle to return it.
• It might be a requirement of the investment that foreign firms manage the projects or that a percentage of the resources or earnings are remitted outside.
• Projects do not always assist smaller farms, and they are frequently large-scale.
• Employers may gain more from infrastructure upgrades than employees.
• Assistance can be used to exert political or economic pressure on recipients. 
• Assistance might not target those who require it the most. 
• Due to corruption, local officials may use aid for personal or political benefit.
• Certain infrastructure initiatives might increase the cost of food and water.

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Article contents

Foreign aid as foreign policy tool.

• Clair Apodaca Clair Apodaca Department of Political Science, Virginia Tech
• https://doi.org/10.1093/acrefore/9780190228637.013.332
• Published online: 26 April 2017

The majority of countries around the world are engaged in the foreign aid process, as donors, recipients, or, oftentimes, both. States use foreign aid as a means of pursuing foreign policy objectives. Aid can be withdrawn to create economic hardship or to destabilize an unfriendly or ideologically antagonistic regime. Or, conversely, aid can be provided to bolster and reward a friendly or compliant regime.

Although foreign aid serves several purposes, and not least among them the wish to increase human welfare, the primary reason for aid allocations or aid restrictions is to pursue foreign policy goals. Strategic and commercial interests of donor countries are the driving force behind many aid programs. Not only do target countries respond to the granting of bilateral and multilateral aid as an incentive, but also the threat of aid termination serves as an effective deterrent. Both the granting and the denial of foreign assistance can be a valuable mechanism designed to modify a recipient state’s behavior.

Donors decide which countries will receive aid, the amount of aid provided, the time frame in which aid is given, and the channel of aid delivery. The donor’s intentions and the recipient’s level of governance determine the type or sector of foreign aid. States can choose between bilateral or multilateral methods of disbursing foreign assistance in order to pursue their interests. Although bilateral disbursements allow the donor state to have complete control over the aid donation, the use of multilateral forums has its advantages. Multilateral aid is cheaper, it disperses accountability, and it is often viewed as less politically biased.

Foreign aid, once the exclusive foreign policy instrument of rich powerful states, is now being provided by middle-income countries, too. The motivation for foreign aid allocations by nontraditional donors parallels the motives of traditional Development Assistance Committee (DAC) donors. A main difference between traditional and nontraditional aid donors is that nontraditional aid donors generally do not place conditionalities on their loans.

The issue of fungibility can obstruct the donor government’s purpose behind the allocation of foreign aid. If the preferences of the recipient government are different from those of the donor, the recipient can often divert the aid and use it for other purposes. A recipient government may reallocate its budget after it determines how much aid it is slated to receive. The recipient government will redirect its resources to areas it deems a priority that cannot be funded externally, for example the military or prestige projects.

• foreign aid
• foreign policy
• nontraditional donor
• multilateral trust fund
• fungibility

Introduction

Foreign policy can be defined as a country’s behavior with regard to other states in the international arena, driven by its need to achieve its goals. Although the country’s goals can be economic or ideological, or to solve international problems, security concerns have always dominated the foreign policy agenda. States have several tools they can use to further their foreign policy. Chief among these options are diplomacy, cooperation and association agreements, trade, economic sanctions, military force, and the use of foreign aid. Foreign aid, then, is one of a number of tools that policymakers can use to further their foreign policy goals. Foreign aid also allows the donor state access and influence in the domestic and foreign affairs of other states (Apodaca, 2006 ). Tarnoff and Lawson ( 2016 ) report that U.S. leaders and policymakers view foreign assistance as an “essential instrument of U.S. foreign policy” which has “increasingly been associated with national security policy” (p. 1). Foreign aid is an expedient tool for the diplomat. It helps governments achieve mutual cooperation on a wide range of issues.

The objective of foreign policy is to influence foreign governments and shape international affairs to suit the state. Generally speaking, states have two overarching goals in their dealings with other states in the international system: to maintain and protect the status quo or to change the status quo (Palmer & Morgan, 2006 ). As a tool of foreign policy, foreign aid is provided to a recipient country as either a reward for some behavior or as an inducement to change behavior. The provision of foreign aid is the carrot that influences the recipient’s policy choices or other behaviors. The termination of aid, the stick, can also be used to alter a recipient country’s behavior. Indeed, all foreign aid comes with strings attached, 1 a fact U.S. foreign policy specialists recognize: “Foreign aid is a particularly flexible tool—it can act as both carrot and stick, and is a means of influencing events, solving specific problems, and projecting U.S. values” (Tarnoff & Lawson, 2016 , p. 1). Decisions on how, where, and when to allocate foreign aid is made by political leaders in the donor country. They base these decisions on the government’s perceived national interests, broadly defined. Consequently, foreign aid is used as a means of pursuing foreign policy objectives.

Foreign aid can also be used to complement to military intervention. A study by Kisangani and Pickering ( 2015 ) found that donor-state military interventions have a significant effect on that state’s foreign-aid allocations. During and after an intervention, foreign aid to the target state increases significantly. Foreign aid is a tool used to supplement the use of military force to ensure that foreign policy goals are met and, once met, secured. Foreign aid “demonstrates the benign intentions of the intervention (toward the target populace, if not the target government), and that the military action was undertaken to further ideals shared within the broader international community” (Kisangani & Pickering, 2015 , p. 219). The goals of encouraging good governance and democracy, fostering human rights standards, or alleviating poverty in the target state cannot be achieved with military might alone. They often require the provision of foreign aid.

Academic researchers have studied foreign aid since the establishment of aid giving. Researchers are perplexed as to why and under what circumstances the leaders of one state would provide valuable resources to another state. The continued and increased flow of foreign aid to underdeveloped states is all the more puzzling since because studies have shown that the official reason for aid allocation, economic development, has proven elusive. Is the problem of aid ineffectiveness a result of donor’s motives? Is it due to the channels of aid disbursement? Or perhaps it is about the fungibility of aid itself. The following sections cover several aspects of the relationship between foreign aid and foreign policy, beginning with a general discussion of what political leaders and researchers include as foreign and followed by discussions of the allocation of foreign aid, channels of foreign aid disbursement. an inquiry into who provides foreign aid and why, and, finally, a consideration of the issues related to the fungibility of foreign aid.

What Is Foreign Aid?

The Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) defines foreign aid as resource flows provided by official agencies with the intent to promote economic development. The resources must be given on concessional terms with at least a 25% grant element (OECD, website). The resources can be economic in nature, such as financial contributions, but can also include technical assistance and commodities (such as food aid or agricultural equipment). The costs of humanitarian aid within peacekeeping operations can also be considered foreign assistance. Several states include the gift or sale at concessional rates of military equipment as foreign aid, but the OECD specifically states that official development assistance (ODA) should not include military aid or antiterrorism activities. ODA includes the following sectors of aid allocation as classified and defined by the OECD website ( https://data.oecd.org/development.htm ):

Social Infrastructure and Services, including funding for education, health, and the promotion of civil society. In 2014 , 39.4% of all sector aid was allocated to social infrastructure.

Economic Infrastructure, which funds projects for transportation, energy, communications, and banking and financial services development, 23.4% of aid went to economic infrastructure in 2014 .

Production Sectors, which include funding for agriculture, forestry and fishing, industry, mining and construction. In 2014 , 9.1% of ODA went to the production sectors.

General Budget Support funds, which are contributions to government budgets and support for macroeconomic reforms. Only 1.5% of aid was apportioned to unearmarked 2 contributions, allowing governments to use these funds as they see fit since aid is not tied to a specific project or program.

Humanitarian Assistance, which encompasses emergency response, reconstruction and disaster prevention, and constitutes 10.8% of ODA. Humanitarian Assistance funds are donated to assist in man-made or natural disasters.

Multisector Support funding, which is geared to projects which straddle several sectors but basically include the environment and biodiversity. Multisector support is a recent category of aid and accounted for 10.2% of ODA in 2014 .

Action Relating to Debt, which includes debt swaps, debt forgiveness, and debt relief. A mere 0.43% of ODA is directed to issues of debt relief.

The remainder is unspecified aid. The data on sector aid are taken from the OECD International Development Statistics online CRS Aid Activities dataset ( https://stats.oecd.org/Index.aspx?DataSetCode=CRS1 ).

While aid aimed at economic infrastructure is usually targeted at countries with good governance and mature economic institutions, countries that lack such capacities usually receive aid in the form of social-sector assistance. Social-sector aid allows donors to target the welfare of the people, generally channeling aid through NGOs or multilateral organizations in ways that avoid bad policies of or corruption in recipient governments. Government involvement in education and health is less mandatory than government involvement in trade policy because substitutes for government institutions and procedures may be found in civil society or provided by NGOs and multilateral aid organizations (Bermeo, 2007 ). Typically, as disasters (manmade or natural) overwhelm a government’s ability to respond, foreign aid is directed toward sectors (normally humanitarian assistance) that require less government intervention. Aid directed at general budget funds, meanwhile, is given with the implicit understanding that governments can use these funds as they see fit. Donors become less reliant on good government policies as they move away from economic infrastructure and general budget support to production sector funding, to humanitarian assistance and the social infrastructure sector (Bermeo, 2016 ). Similarly, Akramov ( 2012 ) finds that aid directed at the production sector can be effective at promoting growth even in bad policy environments. Economic infrastructure aid, however, is effective only in countries with medium to high governance ratings. Years of research indicate that the recipient state’s internal capacity to absorb aid matters quite a bit in the donor’s decision on how aid should be allocated. Donors vary the sectorial composition of their aid in response to perceived governmental quality. Countries that are well-governed receive greater shares of their ODA in the budget, economic, and production sectors.

The Many Motives for Foreign Aid

Official governmental rhetoric declares that development and poverty reduction are principal reasons for granting foreign assistance. Foreign aid is given to a recipient country to facilitate economic development, alleviate poverty, and improve human welfare. Aid contributes to global security by tackling threats to human security, such as human rights violations, disease, population growth, environmental degradation, peacemaking, and the growing gap between the rich and the poor. Poverty and extreme inequalities are often causes of social instability and civil unrest, which, in turn, can produce flows of refugees and acts of terrorism. Thus, aid helps build a safer, more peaceful, and more secure world. Foreign aid is provided to many countries but is concentrated in countries reflecting the priorities of the international community and individual donor states. Lumsdaine ( 1993 ), for example, found that humanitarian concerns and moral values were a primary motivation in the allocation of multilateral foreign aid.

Lancaster ( 2007 ) argues that the provision of foreign aid has developed into an international norm. Rich countries provide assistance to poor countries to better the human condition. States are subject to the norms of behavior established by the international community. The allocation of foreign aid has become an accepted and expected standard of behavior among developed states, a standard that is now being recognized among a greater number of middle-income states. Most developed states have established foreign aid agencies, instituted foreign aid mandates, processes and procedures, and joined the DAC. Donor states provide foreign aid to alleviate poverty and foster development in the neediest underdeveloped countries. Lancaster admits, however, that given the number of potential recipients and the ever-expanding need (due to disasters, poverty, or economic crises), donors can also use their aid as incentives or as payments for approved behaviors, or to signal a desire to expand political relationships between donors and recipients.

Consequently, researchers have determined that foreign aid is often provided for interests other than developmental or humanitarian reasons. Bigsten, Platteau, and Tengstan ( 2011 ) estimated that if the European Union countries were to choose to optimize the distribution of foreign aid for the sole motive of reducing poverty, they would need to reallocate $19 billion of the $27 billion of EU aid—that is, over 70% of EU foreign aid—directing it to only the 20 poorest countries. Bigsten et al. ( 2011 ) determined that “the reallocation would lead to a modest increase of poverty among the donor darlings and a large decline in poverty in the orphan countries” (p. 11). However, the EU countries do not wish to optimize their foreign aid because they have economic and political purposes other than poverty reduction when they allocate aid.

Foreign aid is used predominantly to promote geostrategic interests, for the right to build and maintain foreign bases, to strengthen alliances, or to keep allied regimes in power. Foreign aid is also used to maintain friendly relations with foreign governments. Foreign aid facilitates cooperation, and it builds strong alliances. First, foreign aid can be used to maintain nations as allies. By economically or militarily supporting a friendly foreign government, the donor state can prevent the recipient state from falling into the enemy’s camp or from falling to domestic rebels. Second, foreign assistance may be granted in an attempt to gain foreign allies. And third, foreign aid can be used to win the hearts and minds of a population. For example, foreign assistance is viewed as an important instrument in the prevention of terrorist attacks by reducing the appeal of terrorist ideology. There is a general belief that foreign aid could reduce the likelihood of terrorist attacks by averting the causes of terrorism—namely, hopelessness and resentment as the result of extreme poverty, illiteracy, and hunger. Foreign aid would also be used to reduce poverty and inequality in the recipient state, thought to be a source of terrorist activity (Bush, 2002 ). Helping the poor increase their standard of living would also ensure that they would not fall prey to the ideological underpinnings of fundamentalists. Bush believed that “hope was an answer to terror” and that providing people with a positive future would lessen their desire to embrace a radical Islamic ideology. 3

Del Biondo ( 2014 ) concludes that the EU has moved closer to the United States in that its foreign assistance is more explicitly focused on security matters. Providing aid for antiterrorist programs, along with economic growth and development, as well as poverty reduction schemes in developing countries, safeguards European security. The United Kingdom’s Department for International Development ( 2001 ) claims that “many of the problems which affect us, such as war and conflict, international crime, refugees, the trade in illegal drugs and the spread of diseases like HIV and AIDS, are caused or made worse by poverty in developing countries. Getting rid of poverty will make for a better world for everybody.” Poverty and underdevelopment are also the underlying causes of the spread of disease, unwanted migration flows, and human rights violations. Thus, foreign aid is always in the service of foreign policy.

Geopolitical motives for foreign aid allocation have evolved over time and, in turn, affected the levels and direction of aid flows. During the Cold War, foreign aid was a tool Western states used to contain the spread of communism and to keep the power of the Soviet Union in check. In the post-9/11 era, foreign assistance is viewed as an important instrument in preventing terrorist attacks. Security concerns have, and will continue to have, a significant influence on the allocation of aid. Giving aid for geopolitically motivations aid is not an efficient use of aid, however, if purpose of the aid is poverty alleviation in the recipient country. But foreign aid can be successfully used to buy strategic concessions, such as the building of military bases or consolidating military alliances from the recipient government. Foreign aid can be a large component of foreign capital flows for many low-income countries, thus increasing their dependence on donor governments.

Foreign aid can also be used to further the economic interests of the donor state. For instance, it can be used to open foreign markets to multinational corporations headquartered in donor countries, to subsidize the donor’s domestic firms, or to provide employment for the donor’s domestic workers. Recipient countries that provide a favorable climate for foreign investment and trade receive more assistance. Data on the level and distribution of foreign aid reveals that it is mostly directed toward emerging or middle-income economies (those that are recipients of FDI and trade) at the expense of the poorest ones (Bertoli, Cornia, & Manaresi, 2008 ; Dreher, Nunnenkamp, & Thiele, 2011 ). Also, the giving of aid can secure access to vital raw materials (oil, minerals, etc.).

The commercial motive of foreign aid can be seen in the practice of tying aid. Tied aid is when a country binds its aid to the procurement of goods and services from the donor country. Tying aid occurs when, for example, a donor requires that aid recipients purchase the equipment, arms, materials, supplies, parts and services, or other commodities made in the donor country or from the donor’s corporations; use contractors or consultants from the donor country; or that the equipment be shipped via ships or airplanes flagged in the donor country. The intent is to increase market opportunities for the donor’s business interests. Tying aid is a common practice among donor nations. Radelet ( 2006 ) reports that, historically, the United States has tied approximately 75% of its aid, while Greece has tied 70%, and Canada and Austria have tied about 40% of their foreign assistance. In contrast, Norway, Ireland, and the United Kingdom do not tie their aid. Riddell ( 2014 ) reports that, overall, as much as 50% of ODA is tied in some fashion and that the tying of aid reduces its value by 15%–30%. Tying aid can reduce the value of the aid because it prevents the recipient country from buying the best-quality commodities at the lowest prices.

Colonial powers, historically, grant more aid to former colonies (Round & Odedokun, 2004 ). France, Portugal, Spain, and the United Kingdom are substantial donors of foreign assistance to their former colonies. Alesina and Dollar ( 2000 ) have concluded that “an inefficient, economically closed, mismanaged nondemocratic former colony politically friendly to its former colonizer receives more foreign aid than another country with similar levels of poverty, a superior policy stance but without a past as a colony” (p. 33). Aid by ex-colonial powers can help continue or regenerate colonial spheres of influence and reinforce political alliances. The aid provided by France is often cited as an example of a former colonial power wishing to maintain the special relationship with its ex-colonies. Aid provided by the French is used to fund educational training in the French language and culture.

Aid can be given to prevent or offset the effects of global negative externalities that can potentially affect the developed countries (such as infectious diseases, environmental contamination, or debt default). For example, donors will lend more money to countries in debt simply to keep recipient countries from falling into arrears (Birdsall, Claessens, & Diwan, 2003 ) or to provide humanitarian aid to accommodate refugees. Continuing to provide foreign aid to highly indebted countries can be used to reduce the risk that they will default, which could threaten the donor’s economy. And providing aid to countries neighboring a conflict or disaster can stem the flow of refugees seeking asylum in the West.

Foreign aid can also be provided to increase a country’s prestige. Van der Veen’s ( 2011 ) research explains that the Dutch were determined to set a new international level on aid giving in order to project an image of good global citizen, while the Norwegians focused on matching or surpassing other Western nations in the allocation of foreign assistance. States adopt an identity and role in the international community, and some states choose to be viewed as generous global citizens.

If aid were solely motivated by foreign policy objectives and donor self-interest, then how the recipient uses the aid and the importance of the quality of governance in the recipient country should not matter. However, Kilby and Dreher ( 2010 ) show that in practice, states use foreign aid to achieve many overlapping foreign policy goals, including fighting terrorist threats, supporting strategically important countries, fostering relations with countries that maintain large bilateral trade or capital flows, and the championing humanitarian goals of reducing poverty, encouraging democracy, enhancing gender status, and improving human welfare.

Channels of Foreign Aid: Bilateral versus Multilateral versus Trust Funds

When pursuing foreign policy, including foreign aid policy, states can choose between bilateral or multilateral actions. Bilateral aid is resources that flow directly from one country to another. Bilateral aid can be delivered through the public sector, NGOs, or public-private partnerships with the recipient country. Those who advocate the use of foreign aid as a geopolitical foreign policy tool prefer bilateral foreign aid because of the strategic objectives to be gained. With bilateral aid, the donor retains control over the funds and determines who will be favored with aid and under what conditions. Most foreign aid is overseen, and frequently managed, by the donor (Riddell, 2014 ). Donors do not like to give up control of their aid 4 by channeling it through a multilateral agency, unless, of course, they have significant influence over the decision-making operations of the agency. The receipt of bilateral foreign assistance leaves the recipient obligated to the donor.

Aid that is channeled through intergovernmental organizations such as the World Bank or regional development banks; the International Monetary Fund; UN agencies, most notably the United Nation Development Programme; and the OECD is known as multilateral aid. The aid becomes the development asset of the multilateral institution, which it then disperses based on the multilateral institution’s own decision-making process. The donor state cannot earmark or predetermine the aid’s use. Multilateral aid can only be delivered through the multilateral organization. Headey ( 2008 ) suggests that donors tend to channel their anti-poverty, development motivated assistance through multilateral institutions and use their bilateral aid to pursue geopolitical objectives.

The use of multilateral trust funds, or what is often referred to as “multi-bi” assistance, “allow[s] donor governments to cooperate with like-minded donors only, target their aid to specific countries, and development objectives while using the financial and, by and large, the implementation infrastructure of the multilateral organization which hosts them” (Eichenauer & Knack, 2016 , p. 2). Earmarking allows the donor and likeminded countries greater influence in the allocation of multilateral aid decisions by targeting priority issues or economically and politically important countries. In this way, donors can circumvent the multilateral development banks’ allocation of aid based on country performance, institutional capacity, and need. The ability to use the multilateral institutions while maintaining control of their foreign aid is a widespread donor strategy. Reinsberg, Michaelowa, and Eichenauer ( 2015 ) reported that multi-bi aid accounts for 60% of all multilateral aid, and in 2013 , the World Bank was managing over 900 trust fund accounts. The Afghanistan Reconstruction Trust Fund is one of the largest country-specific trust funds. The World Bank benefits from not only the additional fees it collects from donor countries (typically 2% to 5% of the trust fund), but the administration of the multilateral trust funds also allows the bank to increase its staff. The World Bank “holds, invests, and disburses funds,” thereby increasing its power and influence. The Bank’s management of the trust funds “underwrite[s] the Bank’s leadership in responding to international crises” (Independent Evaluation Group, 2011 , p. 9).

Why would states give up control over aid allocation policy by funding multilateral aid programs? Research has established that there are several advantages to using multilateral organizations to manage foreign aid.

Multilateralism is cheaper . Multilateralism is, in the opinion of Thompson and Verdier ( 2014 ), the solution to transaction costs, that is, the costs of negotiating (and renegotiating), monitoring and enforcing an agreement.

Burden sharing . There are 28 donor members of the OECD-DAC and another 29 non-DAC donors. This means that the costs and responsibilities for resolving global issues of poverty or disease eradication are not the burden of one country but based on the ability to pay. Kwon ( 1998 ) explains: “Those who would benefit most from a collective good and have the greatest resources to provide it will bear a disproportionate share of the costs, while “smaller” members of the group will bear a burden that is less than their share of the benefits and resources, behaving as free (or cheap) riders” (p. 39). Small donations can be combined with donations from other countries, amplifying their significance and providing help to recipient countries.

Deniability to the donor state’s own population . Using a multilateral aid agency allows the donor a certain degree of plausible deniability for the resultant outcomes thereby reducing the risk of criticism if the lending fails. Foreign aid does not have strong public support in most countries. But donor governments realize that aid is an important tool of foreign policy. Donors can fund but still distance themselves from politically controversial programs that may upset their domestic constituencies. Providing bilateral aid might not be politically astute if either the donor or the recipient citizenry objects to the funding. In 2013 , North Korea, Iran, and Cuba received a substantial amount of multilateral official development assistance, over $100 million each. Funding these countries, no matter the level of need, would be politically controversial in the United States. But as a major donor to the OECD, the World Bank, and the International Monetary Fund (IMF), the United States is indeed helping to fund programs in unpopular regimes. Donors may direct their aid through multilateral venues when conditions in the recipient country are politically sensitive or fragile, dangerous for staff members, or if the donor simply wants to diffuse accountability.

Multilateral aid is politically neutral and more needs-driven . There is also a perception that multilateralism guarantees uniform treatment and, consequently, is more legitimate and more fair based on need and not politics. This is a particularly important point if the donor’s citizenry believes that bilateral aid is too political and that multilateral aid is more altruistic. Multilateral agencies do hold a degree of autonomy with respect to state control. Thus, it is believed that multilateral aid is less politicized and based more on need and institutional capacity. Bilateral aid, on the other hand, is often controlled by vested interests that direct aid for strategic and political ends (Nunnenkamp & Thiele, 2006 ). However, there is some evidence that multilaterals are not impartial either and can also be easily captured for political and economic gain. A study by Kaja and Werker ( 2010 ) found that membership on the executive board of the World Bank’s International Bank for Reconstruction and Development (IBRD) resulted in approximately double the IBRD funding compared to countries that were not on the board. Favoritism rather than poverty reduction controlled IBRD lending. Similar research has shown that IBRD loans are heavily influenced by a recipient government’s temporary seat on the UN Security Council (Dreher, Sturm, & Vreeland, 2009 ; Kuziemko & Werker, 2006 ). However, Kaja and Werker ( 2010 ) also found that membership on International Development Association (IDA) board had no influence on IDA’s lending decisions. 5

Who Provides Foreign Aid?

Traditional foreign aid donors.

The first and most successful contemporary foreign aid initiative was the European Recovery Program (ERP), popularly known as the Marshall Plan. In 1947 , secretary of state George Marshall announced a United States proposal to rebuild Europe in the aftermath of World War II. World War II had completely destroyed the European economy and infrastructure, and a summer drought and exceptionally frigid winter in 1946–47 killed livestock and ruined crop production. The combination of the man-made disaster of war and the natural disasters of drought and blizzards, resulted in widespread starvation, wretched poverty, unemployment, and housing shortages in Europe. Although the Marshall Plan was motivated by humanitarian concern for the suffering of the European population, the plan also satisfied the strategic self-interests of U.S. foreign policy. United States leadership feared that with the destruction of the European economy and the growing misery of the European people, communism would gain a stronghold. The Marshall Plan proved to be very good for America’s economy, benefiting business, manufacturing, and agricultural interests by increasing U.S. exports and providing jobs to U.S. workers. Over the years, foreign aid has become an indispensable tool of U.S. foreign policy.

In Europe, the provision of foreign aid began with the independence of Europe’s colonies in Africa and Asia. Foreign aid flows to countries where EU donors have historically strong trade relations, investment interests, and colonial ties. Lancaster ( 2007 ) concluded that aid to former colonies has been based on the ex-colonies’ economic need, the desire to preserve the donor’s influence in those countries, and as a means of disengaging while keeping their reputations more or less intact. Aid was also seen as a means to prevent a massive return of settlers and emigrants. Maintaining secure export markets in former colonies is also an important motivation for European foreign assistance. Although these motives remain, the Library of Congress’s ( 2015 ) comparative analysis of foreign aid reports that

the major objective of the foreign aid policy of the EU is the reduction and the eventual elimination of poverty. In pursuing its foreign aid policy, the EU aims to promote human rights, gender equality, democracy, the rule of law, access to justice and civil society, the rights of the child and indigenous people, protection of the environment, and the fight against HIV/AIDS. (p. 10)

Yet issues of security, colonial history, and economic-energy interests redirect the EU’s foreign aid from solely humanitarian need to self-interested practicalities.

Foreign aid priorities vary widely among the individual states.

Lancaster ( 2007 ) states that Japan’s generous aid policy is the result of its reparation payments and its need to secure much-needed raw materials. Japan also used foreign assistance to increase its international reputation and status. Under Article 9 of the Japanese Constitution, Japan was prohibited from maintaining a military (other than for self-defense) and was unable, until recently, to participate in international humanitarian operations. Thus, Japan relied on providing foreign aid to project its power and influence onto the international arena.

During the Cold War, Soviet foreign aid was given to build influence in nonaligned countries and maintain a sphere of influence with poor communist countries (particularly North Korea, North Vietnam, Cuba). In addition, the Soviet Union provided considerable amounts of foreign aid to African states to foster close relations and to secure access to raw materials. After the fall of communism, the Russian Federation became a recipient of foreign assistance. However, in the 21st century , Russia is a “re-emerging donor” of foreign aid ( Guardian , 2011 ). Russian foreign assistance reflects its historical Soviet roots for foreign aid allocations. The largest recipients of Russian aid in 2012 were the Kyrgyz Republic, Tajikistan, Serbia, Mongolia, Cuba, Nicaragua, North Korea, and Syria (OECD, QWIDS, online). Russia’s sectorial focus is on health and food security (Hynes & Trzeciak-Duval, 2015 ).

Growth of Foreign Aid Donors

The highly developed countries in North America, Western Europe, Japan, New Zealand, and Australia, as well as the middle-income countries of China, India, South Korea, Brazil and the oil-rich countries of the Middle East have established foreign aid programs. The importance of foreign aid as a foreign policy tool is substantiated by the fact that foreign aid recipients are also foreign aid donors. In addition to the 28 DAC donors, 6 the OECD identifies 29 non-DAC donors that provide significant amounts of aid annually. Researchers have only recently recognized the importance of nontraditional aid donors in the study of aid as a tool of foreign policy.

More recently developing countries, oftentimes foreign aid recipients themselves, have become foreign aid donors. The motivations for middle-income country foreign aid provisions largely mirror those of traditional donors. Foreign aid by middle-income countries is used to further foreign policy goals, to increase regional power, to advance national interests, and to strengthen commercial ties. Nontraditional (non-DAC) donors have learned that foreign aid can be a useful tool to win allies, garner support in international forums, and advance foreign policy objectives.

Nontraditional donors, it is claimed, have a better understanding of recipient needs and of programs that work (Dreher et al., 2011 ). Accordingly, based on this experience, non-DAC donors are less willing to provide general budget support, aid that allows discretionary use, or outright grants rather than subsidized loans (Davies, 2010 ). As with the DAC donors, much of non-DAC aid is tied (recipients are obligated to purchase goods and services from the donor country). Contrary to the criticism that DAC donors make recipient needs secondary to political, strategic, or commercial interests, it appears that DAC donors are more needs-oriented than non-DAC donors (Dreher et al., 2011 ; Fuchs & Vadlamannati, 2012 ). An empirical study by Dreher et al. ( 2011 ) found that non-DAC donors place less importance on recipient needs than do traditional DAC donors.

The belief that non-DAC donors respond to recipient need is belied by a study by Fuchs and Vadlamannati ( 2012 ). These researchers report that India provides foreign assistance to countries with a higher GDP per capita than India itself, thus underscoring the notion that foreign policy goals rather than human needs motivate the foreign aid allocations of India. Woods ( 2008 ) reports that energy security, increased trade, and new economic partnerships are the primary motivations for most non-DAC donors. Research by Fuchs and Vadlamannati ( 2012 ) confirms that assistance from non-DAC donors is even more self-interested than aid from DAC donors. Given that resources are more dear in poor countries, non-DAC donors require a “return” on the foreign aid investment.

A primary difference between DAC and non-DAC donors, however, is the willingness to provide aid “without Western lectures about governance and human rights” ( Economist , 2010 ). Thus, foreign aid between southern donors and recipients is provided based on mutual benefit, non-interference and respect for sovereignty so that aid is not contingent on human rights protection, the promotion of democracy, or the reduction of corruption (Mawdsley, 2012 ), highly valued conditionalities 7 that traditional donors place on their foreign aid. Funding by nontraditional donors allows countries to reject the conditionality-laden loans of the IMF, the World Bank, and bilateral Western donors (Pehnelt, 2007 ).

China has become one of the major foreign aid donors. 8 China provides aid to countries that accepted it as the legitimate government of the Chinese people. Dreher and Fuchs ( 2011 ) confirm that political concerns drive China’s foreign aid allocations, but no more so than other major donors. China’s aid is free of democratic, good governance, and human rights considerations. China foreign aid is directed towards infrastructure development requiring 50% of the construction contracts to be awarded to Chinese contractors and 50% of the materials to be procured by Chinese business (Kjøllesdal & Welle-Strand, 2010 ).

Many non-DAC Donors provide aid, not only in an attempt to legitimize themselves as regional leaders, but also to assist trade and investment deals. In 2014 , Brazil, China, India, Russia, and South Africa, BRICS Group members, created two new international financial institutions, the New Development Bank (NDB), and the Contingency Reserve Arrangement (CRA). The BRICS set aside $50 billion in initial capital for infrastructure and sustainable development for low-income countries through the NDB, while the CRA had $100 billion in funds for countries in balance of payment difficulties due to short-term liquidity problems (Desai & Vreeland, 2014 ). Mwase ( 2011 ) suggests that BRICS donors allocate foreign aid to countries with weak institutions and poor governance because the World Bank and IMF deny aid to countries they determine to be too risky to finance. Countries who are ineligible for World Bank and IMF loans thus have a source of income provided by BRICS. BRICS have cultivated potential partners and allies from among those World Bank or IMF ineligible countries.

Also in 2014 , China, along with 21 Asia–Pacific nations, established the Asian Infrastructure Investment Bank (AIIB)—with China providing 50% of the initial capital—and the Silk Road Infrastructure Fund (SRIF)—where China is providing $40 billion in startup funds—to help fund infrastructure projects in Central and South Asia (Carsten & Blanchard, 2014 ). China, as a founding member of and the largest contributor to the newly established institutions, plays a significant role in all the new banks’ decisions. Thus, these new funding institutions strengthen China’s political and economic relations with other developing countries. Although the stated purpose of the newly created multilateral, yet regionally focused, development finance institutions (the NDB, CRA, AIIB, and the SRIF) is to complement, not challenge, the established assistance programs, scholars believe that the primary purpose of the banks is to solidify China’s role as regional leader while allowing it to extend its influence among developing countries and providing it with greater access to raw materials (Dixon, 2015 ).

Arab governments have long been major donors of foreign assistance. A report by Rouis ( 2010 ) found that Arab donors, principally Saudi Arabia, Kuwait, and the United Arab Emirates, allocate 1.5% of their gross national income to foreign aid, more than twice the United Nations target of 0.7%. Although Villanger ( 2007 ) reports that Arab aid is used to promote Islam, build Arab solidarity, and is focused on predominantly Muslim countries, Rouis ( 2010 ) acknowledges that Arab aid now extends to a greater number of countries:

At present, Arab ODA covers a wide range of countries, and especially poor countries in sub- Saharan Africa such as Mali, Mauritania, Senegal, Somalia, and Sudan; and in Asia such as Cambodia, Bangladesh, Nepal, Pakistan, Sri Lanka, Tajikistan, and Vietnam. (p. 2)

Like Western donors, Arab donors are strategically motivated in the allocation of foreign aid. Arab donors, however, do not place conditionalities of good governance, democracy, or human rights standards on their aid. But they do closely monitor the projects they fund to prevent corruption (Villanger, 2007 ). The sectorial focus of Arab aid is productive infrastructure.

Two other significant aid donors are also aid recipients: India and Brazil. OECD International Development Statistics ( http://stats.oecd.org/qwids/ ) report that, between the years 2005 and 2009 , Brazil received over $1.47 billion in official development assistance from all donors. Yet the Library of Congress ( 2015 ) writes that Brazil provided $1.8 billion in foreign aid between those same years. The OECD estimates that India furnished $539 million in foreign assistance in 2009 and 2010 and received over $5.3 billion in foreign assistance during that same time period. The Library of Congress also reports that whereas South Africa has “robust and fast-growing foreign aid programs” (p. 222), it still received over $1 billion in 2014 alone. Each of these countries tries to use its aid to influence the policies of the recipient country.

Does Foreign Aid Work as a Foreign Policy Tool? The Issue of Fungibility

Aid fungibility occurs when the recipient uses the aid for purposes other than what the donor intended or when donor aid substitutes for government funding (McGillivray & Morrissey, 2004 ). Fungibility occurs when the recipient government decreases its contribution to a project or program as a result of external funding. If a donor allocates foreign aid to build a hospital, the recipient government can redirect the funds it had intended to use to build that hospital to other projects. Foreign aid, then, frees up government revenue for spending in other sectors, such as the military, nonproductive government consumption for prestige projects, or tax reductions for the wealthy. Collier and Hoeffler ( 2007 ) reported that around 40% of African military spending is financed by OECD aid because of aid fungibility. This does not include outright military aid or aid that is provided to the government for general budget funds. Donors that are concerned about the recipient using the aid for purposes it was not provided for can choose to fund project aid (that is, specific investment loans for funding sanitation infrastructure or building a clinic, for example) 9 over programmatic aid (budgetary support funds, e.g.; Herring & Esman, 2001 ). Morrison ( 2012 ) notes that “there is little doubt that project-based aid is meant to reduce the discretion of recipient countries in terms of how to spend the money” (p. 60). In corrupt, poorly governed, or fragile states, donors will bypass recipient state institutions and disperse their aid through nonstate development partners, reducing the ability of central governments to divert funds (Dietrich, 2013 ). However, Briggs ( 2014 ) suggests that donors may use the fungibility of aid to accomplish foreign policy objectives; for example, if the donor’s citizens would not approve of their government’s support of an authoritarian regime, the donor could “turn a blind eye to fungibility if they wished to support a recipient leader” (p. 195). Indeed, Licht ( 2010 ) shows that donors were more likely to allocate aid to incumbent leaders if they faced an elevated risk of losing power.

For example, the United States’ bilateral economic assistance includes the category of Economic Support Funds (ESF). ESF funding, although officially listed as economic aid, is generally recognized as military assistance since it is used to financially support those countries considered politically and strategically important to the United States’ security interests. The US executive branch favors ESF since, as economic aid, it avoids the public debate and congressional challenges associated with the granting of military aid to authoritarian countries or those that abuse human rights (Ruttan, 1996 ). The ESF program is financial assistance for budget support that allows recipient countries to use their own resources to build up their defense infrastructures. It also includes the sale or grant of U.S. military arms and equipment. According to Tarnoff and Lawson ( 2016 ), 56% of ESF funding went to Egypt, the West Bank, Jordan, Afghanistan, and Pakistan in 2015 .

Conclusions: A Future for Foreign Aid?

In spite of the trillions of dollars provided by foreign aid donors over the past 70 years, global economic inequality persists and countries remain underdeveloped, both economically and politically. Yet though the level of aid transfers varies from year to year, depending on budgetary crises and global need, foreign aid is not going away. An early scholar of foreign aid, speaking about U.S. foreign assistance, wrote over 50 years ago, “Foreign aid as a political instrument of U.S. policy is here to stay because of its usefulness and flexibility” (Montgomery, 1962 , p. 9). These words are just as true in the 21st century . Foreign aid is a tool of foreign policy, not solely an instrument for the economic development of poor countries. However, scholars, such as Diamond ( 2008 ), believe that poverty reduction, the institution of good governance, and the growth of democracy in developing states are in the national interests of donor states. Funding foreign aid with conditionalities can be used to enhance national security, further economic and political interests, and ultimately empower the citizenry of poor countries. However, with the growth of nontraditional donors and their resistance to imposing the conditionalities of democracy and human rights on their lending, foreign aid may be further reduced to the crass, self-interested motivations of commercial or political interests. Given the differences over the motivations for providing foreign aid, it is hardly surprising that questions of whether aid has a future need to be asked and answered.

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1. The recipient of humanitarian and emergency aid is obligated to disburse the donor’s aid in an unbiased, neutral manner. “Humanitarian assistance,” in the words of Duffield et al. ( 2001 ), “has always been a highly political activity” (p. 269). Humanitarian aid has been used to alter conflicts and transform regimes, thus it reflects the foreign policy preferences of donors.

2. Earmarking is when the donor designates its assistance to be used for a particular purpose. The recipient can use foreign aid that is not earmarked for any purpose it desires.

3. The administration’s sentiment was reiterated by James Wolfensohn, the World Bank president (1995–2005), on February 16, 2004, in a speech at the conference “Making Globalization Work for All.”

4. The donor’s desire for oversight and management is not necessarily an unreasonable requirement. Foreign aid is most efficient in democratic countries with good governance, respect for the rule of law, a vibrant private sector, and strong institutions with a competent regulatory system. However, countries in the most need of aid are also the countries short on these same characteristics. Poor countries are often typified as corrupt, lacking accountability, or anocratic or authoritarian governments.

5. The Bank has two major lending agencies. The International Bank for Reconstruction and Development (IBRD) is a branch of the Bank that lends money at market rates to middle-income and creditworthy low-income countries that display principles of good governance but have only sporadic access to private market capital. The International Development Association (IDA) provides loans (credits) and grants to the poorest countries at concessional rates. IDA loans provide money for poverty reduction and human development projects such as primary education, health services, and water and sanitation facilities.

6. The EU as an organization is the 29th DAC member.

7. Conditionalities refer to donors’ demands that the recipient undertake specific structural or systemic level changes, such as adopting economic liberalization policies or demanding more-democratic political procedures. Conditionalities encourage aid recipients to act in accord with the donor’s ideological preferences.

8. China began its foreign aid programs in 1950 with funds provided to North Korea. Later, in 1956, China extended its aid to non-Communist countries. Since that time, China’s aid programs have expanded in size and scope.

9. A reliance on project assistance will not completely solve the problem of fungibility since recipient governments can still skew the projects towards higher income groups.

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What Is Foreign Aid? Forms of Aid, Statistics, and Examples

What Is Foreign Aid?

The term foreign aid refers to any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant , or loan. Most people tend to think of foreign aid as capital , but it can also be food, supplies, and services such as humanitarian aid and military assistance.

Broader definitions of aid include any assistance transferred across borders by religious organizations, non-governmental organizations (NGOs), and foundations. U.S. foreign aid usually refers to military and economic assistance provided by the federal government provides to other countries.

Key Takeaways

• Foreign aid is any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant, or loan.
• Countries may provide aid through capital, food, supplies, and services such as humanitarian aid and military assistance.
• Developed nations may provide developing nations with foreign aid after a natural disaster, times of conflict, or during an economic crisis.
• The United Nations requires advanced countries to spend at least 0.7% of their gross national income on international aid.
• The United States is the most generous, according to the Organisation for Economic Co-operation and Development.

Understanding Foreign Aid

As noted above, foreign aid is any type of assistance that one country's government provides to another nation, usually from developed to developing nations. Governments may issue aid in the form of:

• Food and supplies
• Medical assistance including doctors and supplies
• Humanitarian aid such as relief workers
• Training services including agricultural training
• Health care
• Assistance with infrastructure building
• Activities related to peacebuilding

Governments may make agreements with the countries to which they provide assistance. For instance, a developed nation may agree to provide grants to those in need after a natural disaster or during times of conflict, whether they provide any type of capital or humanitarian aid. Or a government may agree to issue loans to an allied nation that experiences economic uncertainty with special repayment provisions.

Concerned about where foreign aid goes? Only a small portion of American assistance goes to federal governments, while the rest is assigned to non-profits, NGOs, and other organizations.

According to the Organisation for Economic Co-operation and Development (OECD), member countries contributed a record $161.2 billion in international aid in 2020. This was divided into:

• $158 billion in capital grants and loans (including $12 billion directed toward COVID-19 relief)
• $1.3 billion to develop private sector vehicles for growth
• $1.9 billion worth of loans and equity to private companies

The United States is the most generous, according to the OECD, providing $35.5 billion in foreign aid in 2020. The remaining countries that were among the top five donors included:

• Germany: $28.4 billion 
• The United Kingdom: $18.6 billion 
• Japan: $16.3 billion 
• France: $14.1 billion

The United Nations (UN) calls for economically advanced countries to spend at least 0.7% of their gross national income (GNI) on international aid. Turkey, Denmark, Luxembourg, Norway, Sweden, and the United Kingdom are the only countries that met or exceeded this level. The total contribution of member countries, though, averaged 0.3%—much lower than the UN target.

According to Security Assistance Monitor, the Middle East and North African region received the most assistance, followed by the Sub-Saharan Africa region. The countries that received the most foreign aid from the U.S. for 2020 include Israel, Jordan, Egypt, Tanzania, and Uganda.

Special Considerations

Foreign aid estimates tend to vary, given the different agencies, funding methods, and aid categories associated with U.S. foreign assistance efforts. For instance, the Congressional Research Service (CRS)—a nonpartisan organization—the country spent $44.12 billion in foreign assistance during the 2020 fiscal year. That figure amounted to 1% of the total federal budget authority.

Aid can be provided by governments directly or through special federal agencies. For instance, the  United States Agency for International Development (USAID) was created in 1961 to provide civilian aid. It provides assistance with education, environment, climate change, global health, crises and conflicts, food and agriculture, water, and human rights.

History of Foreign Aid

Foreign aid—also commonly referred to as international aid and economic aid—isn't a new concept. The colonies were recipients of foreign military aid, particularly from France, during the American Revolution . During World War I, the U.S. government loaned the Committee for Relief in Belgium $387 million—much of which it later forgave.

U.S. foreign aid began in earnest during World War II. Before entering the war, the government began funneling funds and materials to the allied nations under the Lend-Lease program, which totaled $50.1 billion by August 1945. The United States also contributed $2.7 billion through the United Nations Relief and Rehabilitation Administration (UNRRA), beginning in late 1943.

For the four years following 1948, the U.S. gave $13 billion in aid to countries affected by the war such as the United Kingdom, France, and West Germany through the Marshall Plan . The Mutual Security Act of 1951 authorized around $7.5 billion in foreign aid per year until 1961. The amount of aid authorized by the Mutual Security Act in 1951 was approximately 2.2% of the country's gross domestic product (GDP).

OECD. " COVID-19 spending helped to lift foreign aid to an all-time high in 2020 Detailed Note ." Accessed Oct. 6, 2021.

Inter-Agency Task Force on Financing for Development. " Official Development Assistance ." Accessed Nov. 2, 2020.

OECD. " Aid by DAC members increases in 2019 with more aid to the poorest countries ." Accessed Nov. 2, 2020.

Concern Worldwide U.S. " Foreign Aid by Country ." Accessed Oct. 6, 2021.

Congressional Research Service. " Foreign Assistance: An Introduction to U.S. Programs and Policy ." Accessed Oct. 6, 2021.

USAID. " What We Do ." Accessed Nov. 2, 2020.

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• What Is Foreign Aid And Does It Work?

What is foreign aid and does it work?

Foreign aid is assistance given out by donors such as governments or NGOs for several reasons, ranging from moral or altruistic interests to political or economic ones. However, once the aid is distributed, there is no tracking mechanism for this aid. For this reason, some experts question the effectiveness of foreign aid. Others argue it is crucial in order to solve the poverty trap.

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Waya Quiviger has worked for the World Economic Forum in Geneva as Manager of the Global Leaders for Tomorrow (GLTs), a community of outstanding young leaders, many of them social entrepreneurs. She has also consulted for the Women’s Forum and the Club de Madrid.

She currently teaches Global Governance & International Organizations and Aid, Development and Social Entrepreneurship in the Bachelor in International Relations and in the Master in International Relations. From 2009 to 2018, she was the Executive Director of the Master in International Relations.

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Impact of Regime Type on the Influence of U.S. Foreign Aid

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Brian Lai, Daniel S. Morey, Impact of Regime Type on the Influence of U.S. Foreign Aid, Foreign Policy Analysis , Volume 2, Issue 4, October 2006, Pages 385–404, https://doi.org/10.1111/j.1743-8594.2006.00037.x

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Past studies of U.S. foreign aid and UN voting have not taken into account the different incentives of leaders based on regime type. Democratic and nondemocratic leaders use different means to remain in power, conditioning their response to foreign aid. Nondemocratic leaders can use foreign aid to provide private goods to elites ensuring continued support or to improve their coercive capabilities to maintain power. Democratic leaders can use neither of these tools, as their tenure requires mass support. This means nondemocracies are more likely than democracies to change their voting behavior in the UN to match donor preferences. Controlling for the influence of regime type allows us to test for when foreign aid is an effective tool of state policy. We find that nondemocratic state leaders respond to increased foreign aid by voting with the U.S. in the UN, whereas democratic leaders are nonresponsive to foreign aid.

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FOREIGN AID Definition, Source, Arguments of Foreign Aid

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The concept of foreign aid is widely used and accepted as a flow of financial resources from developed countries to developing countries on development grounds. However, The role and effects of foreign aid in the economic development of developing countries have been and are controversial issues. foreign aid is advocated as necessary for the promotion of economic development in the least developed countries (LDC's). The purpose of foreign aid programme to LDC's is to accelerate their economic development up to a point where a satisfactory rate of growth can be achieved on a self sustaining basis. Thus the general aim of foreign aid is to provide in each LDC a positive incentive for maximum national effort to increase its rate of growth. However, the effects of foreign aid on the economic development of developing countries have been controversial issues. Some economic studies of foreign aid suggest that it is successful, as the other studies find no relationship between foreign aid and growth rate of output and suggest that it also retards economic growth in developing countries by leading to the structural distortions of the economy.The development of Bangladesh is still characterized by two parallel trends. The first is the mobilization of concessional foreign aid, and the second is getting effective market access for exports from Bangladesh. The threat of climate change, food crisis, fuel shortage and financial crisis may have an impact on implementation of PRSP. Hence, aid as a source of financing for reaching the MDGs is still an important component of required resources. However, unless this aid can be made more effective, the objective of reducing poverty may remain a far-fetched goal. The aid scenario in Bangladesh has been undergoing changes during the last few years. The change is manifested not only in terms of sources and volume of aid, but also in terms of sectoral allocation and utilisation. Bangladesh is coming out of aid dependency. This paper will give a short description of problem and prospect of foreign aid in Bangladesh.

Catrinus Jepma

Countries that are in the process of developing are using foreign financing in development to break down the bottleneck they are in and to speed up this process. One of them is foreign aid. Countries claim foreign assistance for three purposes, which are thought to prevent development. These; The inadequacy of internal savings required for development, the inadequacy of capital and technical information, the inadequacy of the external payment means required for imports. But in practice, it is difficult to say that these problems have always been solved. In some cases, external assistance may even cause such problems. Therefore, GOUs should carefully analyze the natural economic consequences of foreign aid and the conditions for receiving foreign aid before using foreign aid. The purpose of this study is to draw attention to the real and long-term effects of external aid and the circumstances that cause them. According to this; Foreign aid payments can lead to balance problems, low savings rates, obstacles to growth, and a decrease in the international competitiveness of companies in the country.

Sati Elifcan Ozbek

In this paper, I aim to answer a take-home exam question which is on the issue of development of foreign aid characteristics and application starting from the World War 2. The causes and turning points that brought about a change in the development process of foreign aid have been also elaborated briefly.

Christopher Pinckney

This paper analyzes the implications of domestic and foreign aid on developing countries. This analysis is primarily through a scope of market systems and the effects of aid on these markets.

Journal of Political Sciences & Public Affairs

Nigatu Adane

mekha rousseau

2018 International Conference on Education and Global Studies – Summer Session http://soci-science.org/iconegs-summer ISSN 2432-7433

Aswin A R I Y A N T O Azis

There has been considerable attention within the academic communities, by both theorist and practitioners in the field of foreign aid and development studies towards the development of emerging donors for the past few decades. Many of these emerging countries, such as China, India and Taiwan has transformed from aid recipient to aid donor. The approach of these new donors may have challenged the rules and norms maintained by major donors by overlooking criteria in aid giving and emphasizing more on their own interest. Some scholars has pointed out the irony of the emerging donors that eventhough these emerging donors has experienced various forms of tied aid under certain particular motives by traditional DAC donors, they might have not learned to use these experiences to detach their own aid from their diplomatic and economic interest. Indonesia, one of the country that going towards becoming an emerging donor herself, has been critisized for showing the same attitude by her aid in the South Pacific countries. This essay attempts to compare the motives of several emerging donors mentioned above. It puts forward an argument that instead of putting development and humatarian motives at forefront, these new donors' aid is still dominated with geopolitics and commercial motives. The essay adopts Therein's Left and Right perpective as general point of view in looking at the case studies. It also uses Anderson's aid allocation motives to categorize the donors' interest. The essay finally suggests that emerging donors should work with major donors to mould a better form of aid with its core purpose of poverty reduction and sustainable development.

Journal of the Bangladesh Association of Young Researchers

Mustafa Murshed

Curt Tarnoff

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Bell Ringer: Foreign Aid

Foreign aid and usaid.

Senator David Perdue discussed the reasons for foreign and USAID while speaking about budgetary impacts of providing foreign aid.

Description

Senator David Perdue discussed the reasons for foreign aid and USAID while speaking about budgetary impacts of providing foreign aid to other countries.

Bell Ringer Assignment

• What Senate committee oversees foreign aid and USAID?
• What is meant by "foreign aid?"
• Explain the needs around the world that Senator Perdue mentions?
• What are the three concerns that Senator Perdue mentions?
• Where does the funding for U.S. foreign aid come from? What is the issue with this?

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What is Foreign Aid? Explain different types of the foreign aid which are provided by developed nations to the least developed nations.

• Post author: IGNOU ASSIGNMENT WALA
• Post published: July 28, 2023
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Foreign aid, also known as international aid or overseas aid, is a term used to describe the voluntary transfer of resources, assistance, or support from one country to another for the purpose of promoting economic development, alleviating poverty, improving infrastructure, and enhancing the overall well-being of the recipient nation. Foreign aid is usually provided by developed or wealthier nations to less developed or underprivileged nations.

There are various types of foreign aid, each serving different purposes and objectives. The types of foreign aid can be broadly classified into the following categories:

1. **Economic Aid:** Economic aid focuses on providing financial resources to support economic development and stability in the recipient country. It may come in the form of grants, loans, or credits. Grants do not need to be repaid, while loans and credits have to be repaid over time, often with interest. Economic aid can be used for infrastructure development, capacity building, and investment in various sectors such as education, healthcare, agriculture, and energy.

2. **Humanitarian Aid:** Humanitarian aid is given in response to emergencies, disasters, or conflicts. Its primary goal is to provide immediate assistance to save lives, alleviate suffering, and meet the basic needs of affected populations. Humanitarian aid includes items like food, water, shelter, medical supplies, and emergency relief services.

3. **Technical Assistance:** Technical assistance involves sending experts, professionals, and advisors from the donor country to the recipient country to provide knowledge, skills, and expertise in specific areas. This type of aid aims to build the recipient’s capacity and capabilities to address challenges and promote sustainable development.

4. **Food Aid:** Food aid, as the name suggests, involves providing food supplies to countries facing food shortages or famine. It can be in the form of direct food donations or cash transfers to purchase food.

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5. **Military Aid:** Military aid is given to bolster the recipient country’s defense capabilities. It may include military equipment, weapons, training, and other forms of support to strengthen the recipient’s security and defense.

6. **Development Aid:** Development aid focuses on promoting long-term economic growth and development in the recipient country. It aims to improve the standard of living, infrastructure, healthcare, education, and overall economic conditions.

7. **Debt Relief:** Developed nations may offer debt relief to less developed countries by canceling or reducing the debts owed by the recipient country. This allows the recipient to allocate more resources to developmental initiatives rather than servicing debts.

8. **Environmental Aid:** Environmental aid is directed towards supporting projects and initiatives that promote environmental sustainability and address climate change issues. It may include funding for renewable energy projects, conservation efforts, and sustainable development practices.

9. **Budget Support:** Budget support is a form of aid where funds are provided directly to the recipient government’s budget. This approach allows the recipient country to allocate resources based on its own development priorities and policies.

Each type of foreign aid serves a specific purpose, and donors tailor their assistance based on the needs and priorities of the recipient nation. The effectiveness of foreign aid depends on various factors, including the transparency and accountability of both donor and recipient countries, the alignment of aid with the recipient’s development goals, and the efficient utilization of aid resources.

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NATO foreign ministers to discuss $108bn military aid fund for Ukraine

NATO foreign ministers to hold preliminary talks as they seek to agree on a five-year support package for Ukraine.

NATO foreign ministers are set to discuss how to put military support for Ukraine on a long-term footing.

At a two-day meeting beginning on Wednesday, ministers are expected to discuss a proposal by NATO chief Jens Stoltenberg for a 100 billion euro ($108bn) five-year fund for Ukraine, officials said.

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Under the plan, NATO would take over some coordination work from a United States-led coalition known as the Ramstein group. The step is designed in part to guard against any cut in US support if Donald Trump returns to the White House, diplomats said, according to the Reuters news agency.

“Foreign ministers will discuss the best way to organise NATO’s support for Ukraine, to make it more powerful, predictable and enduring,” a NATO official said.

“No final decisions are to be taken at the April ministerial meetings, and discussions will continue as we approach the Washington summit in July.”

The proposal is expected to be discussed at the meeting in Brussels on Wednesday and Thursday, with the aim of finalising a package in time for a NATO summit in Washington in July.

Until now, NATO as an organisation has restricted itself to non-lethal aid for Ukraine out of fears that a more direct role could trigger an escalation of tensions with Russia. Most of its members provide weapons to Ukraine on a bilateral basis.

But diplomats said there was a growing view within NATO that the time had come to put military aid to Ukraine on a more sustainable, long-term footing and the transatlantic alliance was best placed to take on much of that role.

Some also said that threats by Russian President Vladimir Putin that he would regard various steps taken by NATO allies as escalatory had not led to retaliatory action against them.

Discussions at early stage

As part of the plan, NATO would create a NATO Mission for Ukraine, although it was as yet unclear whether the mission would operate inside the country, diplomats said. Some countries were cautious about even naming the operation as a mission.

Stoltenberg, NATO’s secretary general, has said the plan is partly “to shield against winds of political change” in any NATO member but Trump is uppermost in the minds of many, a senior NATO diplomat said.

“No final decisions are to be taken at the April ministerial meetings, and discussions will continue as we approach the Washington summit in July,” the official said, declining to be named.

Diplomats cautioned that discussions on the proposal were at an early stage and it was unclear whether the 100 billion euro total would be accepted or how it would be financed. All NATO decisions require consensus among the alliance’s 32 members.

“It goes some way to protecting in case of Trump. But it is impossible to create something Trump-proof,” said another diplomat.

“A fund of 100 billion looks very optimistic, knowing how difficult it was to agree on a smaller amount at EU level,” the diplomat added.

NATO foreign ministers are also expected to discuss the race to replace Stoltenberg after Romanian President Klaus Iohannis launched a surprise challenge against the frontrunner, Dutch Prime Minister Mark Rutte.

Diplomats said Rutte now has the support of some 90 percent of NATO countries, but Hungary and Turkey remain holdouts blocking a swift nomination ahead of the summit.