Development Aid And Economic Growth In WAEMU Member States

The importance of official development assistance(ODA)to an economy in need of financing dates back several decades.The massive influx of external capital into developing countries is seen as a way to solve the problems of economic take-off and sustainable development.However,is that the case? If so,why has the growth of these countries remained problematic for 60 years?For several years,developing countries have received ODA,but although some of these countries have stood out,many of them remain among the least economically advanced countries on the international scene.It is the case for countries that are members of the West African Economic and Monetary Union(WAEMU).This situation legitimizes the questioning of the real capacity of ODA to provide and/or support economic growth in these countries.Several criticisms were made about the responsibility of each agent involved in this process.Whether the reason comes from donor motivation,the management of recipient governments or the fault of the systems applied to the aid allocation process;there is no real consensus about the reason for the lack of results achieved so far.Taken theoretically or empirically,the results of analysis differ from one study to another.This difference is due both to the methods of empirical investigation,to the composition of the samples and often to the lack of application of the general facts relating to the question and the lack of consideration of the economic realities specific to the countries.To remedy these problems,this dissertation uses empirical methods that proved their effectiveness and adapt to the theories and realities of the WAEMU countries,chosen for their similarities.At the number of eight,WAEMU countries share common economic,social and historical similarities and also the same main donor countries.These are countries that receive large flows of aid but whose growths are still unsatisfactory.In order to know what is the impact that ODA has had on these countries and possibly the reasons for the low results achieved to date in the WAEMU zone,this study examined both theoretically and empirically the question.To achieve the objective,the theoretical analyses focused on the different economic theories of allocation,management,emerging issues,potential problems and stylized facts on the structural dynamics of development aid as well as on the growth of WAEMU over the past two decades.Empirically,the study adopted two econometric models that are a combination of inputs and progress derived from previous waves of studies on the issue.The first,for the impact of ODA on growth and the second model concerns the impacts of the dependence on ODA on these countries capacity of growth.To this end,the dependent variables representative of economic growth and government's behavior are,respectively,GDP growth rate and government expenditure.The independent variable of the first model is the aggregate ODA received by these countries and the independent variable of the second model is the aggregate ODA received as a percentage of GDP.Each model is composed by several variables(independent variables and control variables)responding to economic theories.The analysis covered 23 years from 1994 onwards.The analysis conducted by GMM and 2SLS estimators revealed a positive impact of ODA on economic growth in WAEMU countries.However,it also highlighted the substitution effect in the economic behavior of States,thus accentuating the adverse effect of ODA dependency,which reduces aid effectiveness and slows growth.WAEMU countries generate less revenue and invest less because of the anticipation of aid flows.It is therefore imperative that these countries review their economic policies and make every effort to generate the necessary revenue for self-financing.ODA must,therefore,work in this direction and focus on sectors that can generate as much revenue as possible so that these governments can become self-financing shortly.The dissertation innovated by providing some new evidence of the joint relationship between aid,tools of economic policy and the economic expansion of WAEMU countries.It highlights the points of failure relating to the restrictions implied by the receiving aid while making a subjective analysis of the tools of growth.