NCPA - National Center for Policy Analysis

Canada's Failing Foreign Aid Policy

August 6, 1999

Canadian foreign aid dollars are being directed towards the least economically free countries, says a new report by Canada's Fraser Institute. Aid recipients were ranked using Index of Economic Freedom developed by Fraser and other research organizations. The index looks at items such as the rule of law, access to an impartial judiciary, monetary policy, and taxes.

  • The report notes that 74.4 percent of Canadian aid has gone to the bottom 40 percent of countries ranked according to the level of economic freedom in that country.
  • Indeed, countries that restrict the freedoms of their citizens the most are more likely to have Canadian foreign aid sent directly to the government, rather than non- governmental organizations.
  • Recent research at the World Bank indicates that aid sent to countries with bad policy environments does little to help growth, whereas aid given to those with better policy environments can be beneficial.

The report suggests that Canadian foreign aid policy has been misguided. It recommends eliminating foreign aid to the least economically free countries, except in cases where aid dollars are able to secure permanent reform. It is also notes that voluntary action such as private investment and charity flows are becoming much more important than foreign aid.

Finally, the report suggests that developed countries remove trade barriers: an alternative that would benefit both developed and developing worlds.

Source: Dexter Samida, "A Hand Out Instead of a Hand Up: Where Foreign Aid Fails," July 30, 1999, Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC V6J 3G7, Canada, (604) 714- 4541.


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