AID in the context of fragile states

Abstract

From 1980 to 2013, Somalia received more than $14 billion in foreign aid and yet managed to get listed among the most fragile states in the world. With Somalia’s government lack of capabilities and expertise in handling such huge aid flows, issues of accountability arise, as well as concerns of whether foreign aid has by any measures contributed to improving the state's peace, stability, and governance. Statistical analysis was conducted using quantitative, secondary data obtained from the World Bank to observe the relationship between foreign aid, governance, and institutions in Somalia. Time series data of official aid to Somalia and governance indicators such as political instability and absence of violence, government effectiveness, rule of law and control of corruption from the periods 1996 to 2013 was examined. The results show that there is a statistically significant negative relationship between foreign aid (development and humanitarian aid) and governance indicators (political stability, rule of law and government effectiveness). In addition, there is no statistically significant evidence that there is a relationship between foreign and control of corruption indicator. By separately testing the relationship between development aid and governance indicators, the results show that there is a statistically significant negative relationship between development aid and governance indicators (political stability, rule of law and government effectiveness). Moreover, there is no statistically significant evidence that there is a relationship between development aid and control of corruption indicator.