The Effects of War and Peace on Foreign Aid

The Effects of War and Peace on Foreign Aid

The stability of a country greatly determines the distribution of foreign aid in developing countries. Foreign aid is of great significance to developing countries since it substantially impacts the level of Gross Domestic Product (GDP) of such countries. The positive and negative impacts of peace and war can best be analyzed by reviewing the case of Afghanistan, a landlocked developing nation that has been ravaged by war in the recent past. Afghanistan has been a major beneficially of foreign aid throughout its history, even before the American War in Afghanistan begun in 2001. When the country enjoyed relative peace and stability, foreign aid still made a huge share of the country’s budget. In the 1940s, Afghanistan’s budget depended on over 40% foreign aid (Roberts, 2009). The amount of foreign aid given to the country rose drastically over the coming decades.  In the 1980’s, the Soviet Union provided much of the foreign aid required by the country. As such, the prevalence of peace enabled the country to secure foreign aid from a number of allied and wealthy nations. Most of the foreign funds were provided with particular interests at hand by the donor nations.

In 2001, the American War in Afghanistan altered the level of foreign funds given to the country. This is because war has a negative impact on the distribution of foreign aid in a country. The immediate impact of the American War of Afghanistan was a decline in the amount of foreign aid channeled to Afghanistan by the international community. Due to the ravaging impacts of the war, there was an urgent need to increase foreign donations in order to avert a humanitarian crisis. As such, foreign aid kept increasing during the war. The fall of Taliban in 2001 put the country on top of the list of countries that required foreign aid (“World Bank Group,” 2014). In particular after the withdrawal of American and allied countries’ forces, the international community realized the need to provide substantial foreign aid assistance to the country. The war has also affected the distribution of foreign aid in that the process is marred by corruption. Corruption hinders development since funds meant for development are channeled to other uses.

Afghanistan’s leadership has taken a number of concrete actions to relieve the severe problems caused by warfare. Afghanistan government has limited revenue sources. As such, about 90% of the total public expenditure comes from foreign aid. The manner in which foreign aid is spent in the country greatly impacts the welfare of all Afghanistan citizens. Much of Afghanistan’s foreign aid is being utilized in reconstruction efforts. In the 2002/2010 period, 51% of all foreign donations went to security while 49% of the funds were used in development. In the 2002-2010 period, over 28.1 billion dollars has been allocated to development efforts in Afghanistan. A large share of this foreign aid goes to infrastructure projects such as building of roads. Between 2002 and 2010, about 6.02 billion dollars were used in infrastructural projects.

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Agriculture and rural development has been major beneficiaries of foreign aid in Afghanistan. In the 2002-2010 period, 5.44 billion dollars were allocated in the agriculture and rural development sector. About three quarters of Afghans live in the rural areas. As such, agriculture and rural development are integral in achieving a high economic growth. The education sector also received 1.75 billion dollars. Other areas which are major beneficiaries of foreign aid include the health sector, governance, social protection, and the private sector. In order to spruce up development in the country, the government launched the National Solidarity Programme (NSP) which is hailed as the most impactful development program (“World Bank Group,” 2013). Since inception in 2003, the program has financed over 65,000 community development projects. The major goal of these projects is to enable those who live in rural areas to access basic services and improve governance. Under this program, households are given up to a maximum of $200 for approved projects.

The Afghanistan leadership has taken measures to improve the security situation in the country. Since 2001, a staggering 25 billion dollars in foreign aid has been spent on improving the security situation in the country. The Afghanistan leadership has specifically utilized these funds in strengthening the country’s military forces to fight insurgents. In the 2001-2010 period, the security sector used about 51% of the total foreign aid on improving security. This is more spending compared to all other sectors combined (Totakhail, 2011).

The extension of foreign aid in Afghanistan has significantly contributed to reduction in poverty and low incidences of warfare. The major aim of foreign aid in the region has been to stabilize the nation that is reeling from the effects of decade long war. According to Kapstein & Kathuria (2012), foreign aid has the capacity to improve economic growth and development of the country. This report asserts that without foreign aid, Afghanistan would not be able to rebuild the economy. As earlier mentioned, agriculture and rural development sectors have heavily benefited from foreign funds. These two sectors are critical in job creation especially for the rural areas. The Afghanistan government under the former president Hamid Karzai was greatly determined on creating gainful employment opportunities for the citizens with an aim to avert counterinsurgencies. Investing in infrastructure projects has resulted in numerous job opportunities in the region. Nonetheless, foreign aid can have little impact on reducing poverty especially when incidences of corruption and misuse of donor funds are rampant.

Extension of foreign aid also reduces warfare in the Afghanistan region. According to Kapstein & Kathuria (2012), the “winning hearts and minds” (WHAM) theory greatly applies in the region. This theory is hedged on the assumptions that when the population is not satisfied with the leadership, it will most likely favor the insurgents making them stronger. Foreign aid improves the economic performance of the country. As more people become engaged in productive activities, there is a lower likelihood of joining the insurgency. This has the overall impact of reducing conflicts as the government has the majority support. The government is able to directly channel foreign aid to efforts that contribute to overall stability of the country. For instance, Afghanistan government have bolstered the Police Force as well as the Afghan National Army (ANA) using donor funds. The two arms of government have greatly helped in establishing peace in the region by crushing the insurgents.


Kapstein, E., & Kathuria, K. (2012). , E., & Kathuria, K. (2012). Economic Assistance in Conflict Zones: Lessons from Afghanistan. CGD Policy Paper 013. Washington DC:         Center for Global Development.

Roberts, R. (2009). Reflections on the Paris Declaration and Aid Effectiveness in Afghanistan,    Kabul. Afghanistan Research and Evaluation Unit.

Totakhail, M. L. (2011). Foreign aid and economic development in Afghanistan. University of     Erfurt.

World Bank Group. (2013). World Bank releases randomized impact evaluation of           Afghanistan’s National Solidarity Programme. The World Bank.

World Bank Group. (2014). Afghanistan in Transition: Looking beyond 2014. The World Bank. Retrieved from: