Defining Foreign Aid
Foreign aid is voluntary assistance, such as gifts, grants, or loans, that one government freely transfers to another. While most people associate foreign aid with cash, it can also include food, supplies, and services like humanitarian and military help.
Aid can be broadly defined as support provided by religious groups, NGOs, and foundations across boundaries. U.S. foreign aid often includes military and economic help from the federal government to other nations.
Understand Foreign Aid
Foreign aid is any government help to another nation, mainly from developed to underdeveloped ones. Government help may include:
- Food and supplies
- Help with physicians and supplies
- Aid like relief workers
- Training services, including agricultural
- Medical care
- Help with developing infrastructure
- Peacebuilding activities
Countries receiving aid may sign agreements. For example, a developed nation may offer grants to individuals in need following natural disasters or conflicts, regardless of capital or humanitarian relief. A government may provide loans to an ally nation with economic uncertainties, with particular repayment arrangements.
I was wondering where foreign aid goes. Most American aid flows to non-profits, NGOs, and other groups, not federal governments.
The OECD reported a record $161.2 billion in international aid from member nations in 2020. It was separated into:
- $158 billion in capital grants and loans, including $12 billion for COVID-19 relief.
- $1.3 billion for private sector vehicle development for growth.
- $1.9 billion in loans and equity for private firms.
The OECD identified the United States as the most generous, contributing $35.5 billion in international aid in 2020. The remaining top five contributors were:
- Germany: $28.4b
- United Kingdom: $18.6 billion
- Japan: $16.3bn
- France: $14.1 billion
According to the U.N., economically advanced nations should allocate at least 0.7% of their GNI to foreign aid. Turkey, Denmark, Luxembourg, Norway, Sweden, and the U.K. were the only nations over this threshold. The average member country contribution was 0.3%, much below the U.N. aim.
According to the Security Assistance Monitor, the Middle East and North Africa got the most significant aid, followed by Sub-Saharan Africa. Israel, Jordan, Egypt, Tanzania, and Uganda got the most influential U.S. funding in 2020.
Foreign aid estimates fluctuate due to various agencies, financing mechanisms, and aid categories in U.S. operations. According to the impartial Congressional Research Service (CRS), the government spent $44.12 billion on foreign aid in 2020. That represented 1% of the government budget authority.
Authorities can give aid directly or through designated federal agencies. For example, USAID was established in 1961 to provide civilian help. It helps with education, environment, climate change, global health, crises, conflicts, food, agriculture, water, and human rights.
Foreign Aid History
Foreign, international, and economic help aren’t new. During the American Revolution, the colonies received military help, mainly from France. Wartime U.S. loans to the Committee for Relief in Belgium totaled $387 million, much of which was forgiven.
WWII saw the start of U.S. international aid. Before joining the war, the U.S. gave the allies $50.1 billion in Lend-Lease finances and equipment by August 1945. The United States provided $2.7 billion through UNRRA in late 1943.
In the Marshall Plan, the U.S. provided $13 billion in help to war-affected countries, including the UK, France, and West Germany, for four years after 1948. The Mutual Security Act of 1951 allocated $7.5 billion in foreign aid until 1961. In 1951, the Mutual Security Act permitted help equal to 2.2% of the country’s GDP.
- Foreign aid is voluntary help from one country to another, such as a gift, grant, or loan.
- Countries can offer finance, food, supplies, humanitarian relief, and military aid.
- After natural disasters, wars, or economic crises, developed nations may help underdeveloped ones.
- According to the U.N., advanced nations must pay 0.7% of their GDP on overseas aid.
- Economic Cooperation and Development says the U.S. is the most generous.