Recent literature has addressed the value and efficacy of foreign aid with the identification of country-specific and non-linear effects on the growth of the foreign-aid relationship. This study addresses these issues utilizing the System Generalized Method of Moments (GMM) and focuses on the functions of institutions in mediating the effectiveness of various aid programs affecting the human development indicators (HDIs) in sub-Saharan Africa, a region facing challenges in achieving the Sustainable Development Goals (SDG). The findings indicate that aggregated bilateral aid has a negative impact on HDIs and other welfare initiatives, while disaggregated bilateral aid comprising sector aid programs has a positive effect on HDIs. Additionally, institutional qualities show a significant positive influence on both types of aids. From a policy perspective, the article proposes scaling up foreign aid in targeted areas where it is most effective and calls for proactive and robust institutions to ensure accountability and probity. The study also suggests exploring innovative means of aid delivery in addition to traditional methods.
Cite this paper
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