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A Review of the Legitimacy of Foreign Aid in Contributing to Economic Prosperity

International Journal of Business Ethics in Developing Economies

Volume 9 Issue 2

Published: 2020
Author(s) Name: M. Adnan Kabir, Liliping | Author(s) Affiliation: Lecturer, Department of Business Administration, University of Liberal Arts Bangladesh, Bangladesh
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Foreign aid, the altruistic act of sovereign fund transfer, is thought to be a panacea for economic prosperity, along with a myriad of other socio-economic benefits, in developing and underdeveloped economies. The historical narrative of foreign aid as an indispensable tool for economic development is not without criticisms, as its contribution towards poverty alleviation, economic growth, and income inequality reduction is often questioned. In addition, intricate interactions of various factors - conditionality, institutional failure, and corruption - have made measurements of foreign aid effectiveness even more complex. Conditionality restricts aid effectiveness, while widespread corruption and institutional failure escalate the existing problem of income inequality. This seemingly insurmountable conduct has proven to be a daunting challenge, as developing countries struggle to unfasten themselves from the insidious grip of corruption and institutional failure, which is a painfully pervasive dispiriting reality. This study focuses on the historical narrative of the concept of foreign aid provision and attempts to present a synthesis of the contemporary literature on the numerous socio-economic variables that disorient foreign aid’s efficacy.

Keywords: Foreign Aid, Institutional Failure, Income Inequality, Conditionality, Corruption

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