Effect of Foreign Aid on Poverty Reduction in Sub-Saharan Countries
Abstract
Poverty remains a persistent challenge in Sub-Saharan Africa, despite the substantial inflows of foreign aid from bilateral and multilateral donors, humanitarian agencies, and technical assistance programs. This study examines the effect of different types of foreign aid on poverty reduction in 49 Sub-Saharan African countries from 2015 to 2024 using a System Generalized Method of Moments panel regression approach. Secondary data were collected from reputable sources including the OECD Creditor Reporting System, World Bank World Development Indicators, and UNDP Human Development Reports. The results reveal that poverty is persistent over time, highlighting the importance of sustained interventions. Bilateral Official Development Assistance and multilateral aid were found to have significant negative effects on poverty, indicating that these forms of aid are most effective in reducing poverty levels. Humanitarian aid demonstrated moderate but significant poverty-reducing effects, while technical aid, though negatively associated with poverty, did not show a statistically significant impact in the short term, suggesting its longer-term and indirect contributions to development. Based on these findings, the study recommends that donor countries and international organizations strategically target bilateral and multilateral aid, deploy humanitarian assistance effectively during crises, and design technical aid programs to strengthen capacity and institutions for long- term poverty alleviation.
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