The Impact of International Aid on Economic Growth of Afghanistan

Year 2020, Volume: 11 Issue: 2, 99 - 114, 03.01.2021

Savaş Çevik Abdul Amanat

Abstract

Keywords

foreign aid, official development assistance

The Impact of International Aid on Economic Growth of Afghanistan

Abstract

Abstract: Although foreign countries and international organizations have provided 73 billion dollars to this day and Afghanistan has plentiful natural resources, Afghanistan is still one of the impoverished countries in the world. This fact leads to a question: Does foreign aid boost Afghanistan’s economic development? This paper aims to examine the impact of Official Development Assistance (ODA) on the Gross Domestic Products (GDP) of Afghanistan to find out whether ODA has led to economic growth in Afghanistan or not? We have analyzed the impact of international aids on the real GDP of Afghanistan by using Johansen’s Cointegration test and Fully Modified Least Squares (FMOLS) model with data from 1984 to 2017 for 34 years. The result has revealed that official development assistance has a positive long-run impact on GDP of Afghanistan, as one percentage change in ODA leads to an increase of 0.32% in GDP in the long run.

Keywords

official development assistance, foreign aid, international aid, economic development, Afghanistan

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