Impact of Foreign AID on Poverty Reduction in Ghana (2008-2018)

Abstract

There have been various forms of foreign aid to developing countries of which Ghana is a beneficiary. Many theories have been attributed to the inception of foreign aid to less developed countries. In some researches, Foreign aid have been attributed to having a great impact on poverty reduction however, there are other studies which have come out with findings that show that foreign aid does not have an impact on poverty reduction. This research therefore seeks to examine the trends of foreign aid to Ghana and ascertain whether the foreign aid received by Ghana has had any impact on poverty reduction from the periods 2008 to 2018. Relevant Time series data on the variables used in the model were obtained from the World Bank and Ministry of finance indicators. This provided the necessary data for which inferences were made. The data for the study was first tested for stationarity of the variables. The Bounds Test for cointegration was also employed to test whether there exist a long-run relationship among the variables. Findings indicate that there appears to be no important effect of foreign aid on poverty reduction in Ghana. An amount of factors can be ascribed to this unfortunate long-term outcome of foreign aid. Developing nations like Ghana can depend on trade and international direct investment to strengthen their capital markets and empower institutions and individuals to reduce the poverty rates in the country.