Exploring the impact of foreign aid on governance in Ghana

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This thesis is a contribution to the body of knowledge on aid and governance. African countries depend on official development assistance to conduct primary governmental functions. However, few countries are well governed or show signs of aid efficacy. Also, various accounts of the impact of aid on development are divergent in their conclusions but regardless of this, there is an influx of aid to solve Africa’s problems. On the other hand, the crucial role of governance quality in establishing development is rather apparent. With the continuous flow of aid in the face of deteriorate governance, there is the apparent question: Is aid dependency deteriorating governance? Mainstream theory suggest that the two variables are related. Therefore, this thesis sought to explore if indeed the relationship between foreign aid and governance holds for Ghana, the flagship country for IFI programs and a country known for its stable governance. With the use of OLS regression on time series data (1984 – 2018), it was found that aid rather promotes governance in Ghana. Governance is measured using the International Country Risk Guide Quality of Governance index and aid dependence is measured by aid percentage of GDP. This finding should be used to spearhead further research into deriving lessons for Africa from the mechanisms that contribute to the aid-governance efficacy in Ghana. Also, since Ghana, through the Ghana Beyond Aid agenda is bent on reducing foreign aid, it is important to consider the performance capacity of both Ghana and Africa with less foreign aid.
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, May 2020
official development assistance, governance, Ghana Beyond Aid, aid effectiveness