A study on the effectiveness of foreign aid on human development of Afghanistan

Abstract

Afghanistan has been plagued by decades of conflict, but the last two decades' movements toward peace offer the opportunity for a new era of human development. The government was committed to achieving the 2030 Agenda and the Sustainable Development Goals. Due to repeated wars and conflicts, the country relies heavily on foreign aid to support its development goals and fill budget gaps. The Human Development Index (HDI) serves as a widely utilized measure of individual well-being, and foreign aid is one of the most effective tools for the development of impoverished nations. In this study, we analyzed the impact of foreign aid on Afghanistan's Human Development Index and its three core components from 1990 to 2019.We achieved our objective through the implementation of the Vector Error Correction Model (VECM). Our study uncovered a reciprocal association between ODA and HDI, including its three aspects. Through our observations, we have discovered that foreign aid plays a crucial role in enhancing human development in the long term. Specifically, for every one percent increase in ODA, we have observed a 0.0007 percent improvement in HDI. In addition, our findings have revealed that human development serves as a driving force in attracting foreign aid. Looking at Afghanistan as a case study, we have observed a significant improvement in overall human development, which we attribute to the influx of foreign aid during our study period.

Keywords

• Foreign aid
• Human development
• Vector error correction model
• And Afghanistan