ODA

ODA Effectiveness in Economic Development of Sub Saharan Africa: A Case of Zambia

By:

University:ABSTRACT

Since 1970s, developing nations of the world has been planning their development, both social and economic, depending on the foreign assistance received from donors and creditors. Among different forms of foreign aid, Official Development Assistance (ODA) is one of the major donations given to the recipient countries subject to the development process of these countries. Most of the countries of Sub Saharan Africa are the poorest and main aid recipients. This paper investigates the autocorrelation between ODA and economic development of Sub Saharan African countries and estimates the empirical evidences through narrowing the focus of the paper to Zambia. Recently Zambia is implementing the strategy of reducing dependency on foreign aid and increasing the resources extraction through trade and foreign investment. This paper evaluated the autocorrelation between ODA given to Zambia and different economic indicators of the country. The results conclude that no autocorrelation exists between the ODA and economic indicators of Zambia except for total reserves. Hence the new strategy of Zambia might be successful in improving the development process of the economy in long run. In this way Zambia might become one of the emerging nations in Sub Saharan Africa that are becoming aid-independent at a faster pace. Future researchers are suggested to include policy variables of monetary, fiscal, and trade policy in extending this paper.

ABSTRACTi

ii

INTRODUCTION3

Official Development Assistance (ODA)5

Problem and Objective in Focus8

Overview of Zambian Economy9

LITERATURE REVIEW11

Official Development Assistance (ODA): A Theoretical Review11

Empirical Literature14

Summary of the Literature Review and Gap to be filled17

METHODOLGY18

Variables18

Data and Source18

Method18

Significance19

Results and Discussion21

GDP Growth23

Income Share23

Vulnerable Employment24

Exports of Goods and Services24

Gross Capital Formation25

Total Reserves25

CONCLUSION26

REFERENCES29

APPENDIX32

INTRODUCTION

Past studies that evaluated the performance of Sub Saharan African (SSA) countries and other countries in African content has shown that the overall performance of this region is not impressive. The decade of 1980s is regarded as the decade of loss for the African countries due to sharp fall in the economic conditions. This fact is evident from the available empirical studies. The gross national product (GNP) per person that is the per capita income has an annual decline rate of 2.2% according to the empirical work done for Sub Saharan African countries. Terms of trade reduced at a rate of 9.1%, volume of imports bulged with an average rate of 4.3% with stagnant volume of exports, and reduction in private per capita consumption is 14.8%. During 1981-90, the per capita real GDP growth in Sub Saharan African region rate was -0.9% contrary to the high population growth rate in the same period. Among all the developing countries, except those in the region of North Africa and Middle East, most of the Sub Saharan African countries are the poorest.

During the decade, China experienced a growth rate of 8.2% while that of the East Asia was 6.3% and in contrast to these fantastic and impressive growth rates, Sub Saharan Africa has a negative one i.e., -0.9%. There was no improvement recorded in the economic performance of Sub Saharn African countries during the ...