Foreign Aid: Nature and Consequences of Foreign Aid in Kenya
The Nature and Consequences of Foreign Aid in Kenya
Introduction
Kenya in Focus
Kenya is known to be one Africa’s struggling economy and severely challenged with poverty and widespread hunger attributed from several domestic factors. However, the international community particularly the wealthy countries including the United States have enacted economic policies ascertaining the aforementioned problems through assistance programs. After gaining independence in 1963, the country became the most economically successful country in East Africa (World Bank, 2003). However, the past two decades of the country’s stability and performance dwindled and resulted to large-scale poverty due to poor governance. Low investment, corruption, poor public service delivery, slow economic reforms and poor infrastructure have significantly slowed down the country and its growth (IMF, 2003). In addition, health concerns also increased in the country as HIV/AIDS incidents plagued the country furthering the deteriorating condition of the people.
Foreign Aid Policies
Kenya has long been a European and American trade partner in agricultural exports. Much of the country’s horticulture exports are shipped to North America, Europe and Middle Eastern countries. These trade partners saw Kenya’s potential in the agricultural sector and the products derived from this sector are considered as major commodities in the importing nations. The prevalence of poverty in Kenya worried the importing countries that trade would also be affected particularly the volume of produced agricultural products. Therefore, the international community have enacted foreign policies to provide aid to Kenya and somewhat alleviate the rising occurrences of poverty by providing food and development funds. Part of the policy is to exempt exported goods from Kenya from duties and taxes except on fish and timber (BISNET, 2005). The reason for continuously provides aid to the country is to ensure that the agricultural production would not compete with the local demand. This is because Kenya’s food supply deficit is already affecting export volumes and to avoid such, the importing countries have devised aid policies to contradict the local demand.
Arising Issues
At first glance the foreign aid policies appeared to be a philanthropic gesture from the wealthy countries. However, looking closely it seems that there are underlying issues that poses negative consequences to the country. Being the top recipient of U.S. foreign assistance, Kenya receives $1 billion worth of aid annually (Blanchard, 2013). It is a significantly generous gesture from a country that is also facing budget deficit, unemployment and unpredictable economy. Policy experts raise eyebrows for this enormous donation given that human rights challenges occasionally complicates the U.S. Congress’s annual budget deliberations on foreign aid (Blanchard, 2013). Having said that, issues emerge such as conflict of interest, political threat, exploitation of natural resources and high dependency on aid.
When it comes to conflict of interest, the issue goes two ways. First, Kenya came to its depressing condition because of widespread corruption. Given the enormous funds provided to Kenya, it comes possible that that the funds were not utilized properly for its purpose because of corruption. Despite the amount received by the country to stimulate its economy, little evidence suggest that the foreign aid have actually improved the lives of the people on Kenya (Povertycure.org, N.D.). This issue is attributed to the lack of strong relationship between economic initiative and aid inflows because of the political instability in the country and corruption in general. Secondly, conflict of interest is also imminent among the donating countries. For instance, recent geographical exploration in Kenya revealed that significant amount of oil deposit was fond in Turkana (Fengler, 2012). This discovery would normally place the country among the richest in the world, but economists see it as a curse to Kenya because oil is among the primary reasons off conflict observed in the Middle East. The sudden wealth realized from the discovery of the natural resources eliminates the quality of institutions in the country, as politicians will be less concerned about undertaking stronger economic reforms. In addition, aid providing countries may see the opportunity of exploiting the natural resources for their own economic benefit and it is worrying that Kenya might be restrained from oppressing it because as the old saying goes “you cannot bite the fingers that feed you”.
Dependency on foreign aid would also increase as a result the country faces significant amount of foreign debt and would later require debt relief, furthering the need for more aid (Njeru, 2003). Conclusively, being dependent on foreign aid would induce a dependent mentality and culture that will come apparent across the Kenyan society (Andrews, 2009). Purposely, foreign aid was given to alleviate extensive poverty, hunger and economic struggle. On the case of Kenya, it is quite ineffective because of the consequences of being largely dependent on other countries. For example, if another person constantly supports an unemployed person, there is a possibility that the unemployed individual would stop seeing for his own growth opportunity and rely on another for his financial needs. Rather than providing monetary assistance, it would have better if the unemployed person were given with sustainable opportunity to earn and work his way to support his own needs. In the case of Kenya, donating countries should rather implement sustainable programs that will provide growth opportunity rather than just giving money.
The Consequences
In general, foreign aid is a source of finance for countries like Kenya. The purpose of utilizing the aid funds to support low saving, thin tax basis and narrow export earnings is logically substantial in alleviating domestic problems. However in recent years, the donor community became more stringent about good policies and fiscal discipline. Consequentially the result of Kenya’s lack of strong economic and political policies is the urgent need for assistance. On the contrary, the assistance provided did not provide significant improvement, instead the empirical result of foreign aid indicates that the flow of aid funds have influenced the Kenyan’s government’s expenditure pattern. The relationship between public spending to GDP is not clear. Normally, if the GDP is low then the fiscal budget is also slim. Therefore, it is expected that the government be supposed to cut its expenditure as well.
In the case of Kenya, expenditure was cut, but with the remaining available funds plus the monetary aid, it appears that the country is still struggling with enormous deficits hindering the government to address its domestic problems. There is an apparent reason for this problem is that is fund misappropriation. For example the former president of Zaire, Mobuto Sese Seko was believed to have stolen $5 billion from its government and that is the time when Zaire is receiving billions in foreign aid. The situation was cited in Kenya as politicians misappropriate the government and foreign aid funds either to failed projects or to their pockets. This is one of the consequences of providing foreign aid; politicians are tempted to embezzle large portions of the government’s money because they are confident that the donor community will continue its monetary support to the country. In addition, according to Kenya’s communication executive Michael Joseph, the foreign aid has failed because the money was not used to build productive infrastructure and private enterprise (Povertycure.org, N.D.).
Although the agricultural sector was regarded as the main economic driver, foreign aid and its development attribution to agriculture also encompasses significant consequences. For example, instead of cultivating and developing new agricultural techniques Kenya’s farmers would resort to stop cultivating their lands because they have this notion that whether they plant or not, money and food will come eventually. This kind of mentally will further affect agricultural production in the country, which will further deteriorate its already deprived food supply. However, the real problem here is the existence of opportunistic behavior that would come across on the donor country. Kenya has several precious resources including oil and precious stone deposits. On the other hand, the country does not have the right infrastructure to utilize their own resources for their own improvement. There is a possibility that the since the donor country would seize the opportunity to exploit those resources instead, but not for the benefit of Kenya. In return, Kenya would not be able to disagree with such endeavors because they cannot afford to oppress the same countries helps them to get by.
This is among the downsides of getting a foreign aid; it can be related to the case of a farmer and his chickens. A chicken serves his master by providing eggs for his breakfast may not have the means to sustain himself and therefore needs the aid of his master for sustenance. On the other hand, the chicken cannot complain on the fact that he was being exploited of his resources because it has this thinking that if it did, it would be thrown out of coup or end up dinner roast. The same goes with Kenya as a country under the mercy of its donors, the country cannot afford to lose its support in defense of its natural resources. Therefore, it would be apparent that any acts of exploitation of the country’s natural resources by its donor would be inevitable. Given that analogy, Kenya would be suppressed of its right and control over its resources because the country is in debt of its donors.
There are speculations about the effectiveness of the foreign aid in Kenya due to the issues arising from the country’s political structure, culture and state of domestic affairs. In terms of conflict of interest for example, China have also increased its aid to Kenya specifically increasing loans and financial grants to Kenya (Mwega, 2009). It sounds good for Kenyan business owners and the country itself to have been granted with loans, but the cry for debt repayment is imminent. Loans are provided with interest and these interests are quite high. Overtime, the existence of loans will put the country to further struggle in terms of trying to repay its debt. The result of such is more financial difficulty for the country to the point that its smaller GDP will be eaten up by debt. This will eventually lead to Kenya needing assistance more than ever because its remaining money will be allotted to pay for its debt and no matter how extravagant the financial aid would be, the country will remain in its current state of economy.
Conclusion
Foreign aid is supposed to provide growth opportunities to Kenya. However, due to the scheme of things, the country’s economy remained stagnant and domestic problems such as poverty will remain unresolved. The existence of corruptions, poor governance and lack of strong economic agenda contributes to the severing domestic problems that the country is trying to resolve for years. Despite billions of dollars in foreign aid, Kenya remained backwards in its progress because of the lack of political will to change the situation. In addition, foreign aid encompasses negative consequences and often perceived as ineffective. Such consequences when explored appear to put Kenya on an opposite side of progress. Instead of providing monetary aid, it would have been best if the foreign aid were given in a form of productive programs that will teach the country to be progress on its own.
References
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