What Is Foreign Aid?

Foreign aid is money that one country voluntarily transfers to another, which can take the form of a gift, a grant or a loan. In the United States, the term usually refers only to military and economic assistance the federal government provides to other governments. Broader definitions of aid include money transferred across borders by religious organizations, nongovernment organizations (NGOs) and foundations. Some have argued that remissions should be included, but they are rarely assumed to constitute aid.

Understanding Foreign Aid

Given the many agencies, funding methods and categories of aid associated with U.S. foreign assistance efforts, estimates can differ. The Congressional Research Service (CRS), which is a nonpartisan organization, reported that total spending on foreign aid was nearly $49 billion in 2015 including military and security assistance. This accounted for roughly 1.3 percent of the federal budget. In 2016, then President Obama requested the U.S. government provide $40.1 billion dollars in aid (0.2% of GDP). The United States Agency for International Development (USAID) was created in 1961 to provide civilian aid, and it dispenses over 40% of the total amount of aid. 

In terms of regions, the Middle East and North Africa receive the most of the economic assistance, according to data for 2015. The Sub-Saharan Africa region receives US$ 1.2 billion, which is approximately 25% of the budget.

According to Security Assistance Monitor, the following countries receive the most in economic aid:

  • Afghanistan (US$ 650,000,000)
  • Jordan (US$ 635,800,000)
  • Kenya (US$ 632,500,000)
  • Tanzania (US$ 534,500,000)
  • Uganda (US$ 435,500,000)
  • Zambia (US$ 428,525,000)
  • Nigeria (US$ 413,300,000)

The countries receiving the most help in security aid are:

  • Afghanistan (US$ S5 billion)
  • Israel (US$ 3.2 billion)
  • Iraq (US$ 1.3 billion)
  • Egypt (US$ 1.3 billion)
  • Syria (US$ 541,500,000)
  • Jordan (US$ 364,200,000)

History of U.S. Foreign Aid

The colonies were recipients of foreign military aid, particularly from France, during the American Revolution. During World War I, the U.S. government loaned the Committee for Relief in Belgium $387 million, much of which it later forgave. 

U.S. foreign aid began in earnest during World War II. Before entering the war, the government began funneling funds and materials to the allied nations under the Lend-Lease program, which would total $50.1 billion ($659 billion today) by August 1945. The United States also contributed $2.7 billion ($35.5 billion today) through the United Nations Relief and Rehabilitation Administration (UNRRA), beginning in late 1943.

For the four years following 1948, the U.S. gave $13 billion ($130 billion today) in aid to countries affected by the war such as the United Kingdom, France, and West Germany through the Marshall Plan. The Mutual Security Act of 1951 authorized around $7.5 billion in foreign aid per year until 1961. 

The amount of aid authorized by the Mutual Security Act in 1951 was approximately 2.2% of GDP, over 10 times the share in 2013. According to a World Public Opinion poll, the average American citizen believed that 25% of the federal budget went towards foreign aid in 2010 when the actual figure was around 1%.  

Other Countries' Aid

The United States is the most generous according to OECD data for overseas development assistance (ODA). In 2015, the nation gave over $30 billion either as bilateral aid or through international organizations such as the World Bank or the United Nations. Germany was second and provided over $20 billion of ODA last year. However, if you look at contributions as a percentage of gross national income, the list is quite different.

Sweden contributes the most when contributions are presented as a percentage of gross national income. In 2015, Sweden’s net ODA was 1.41% of gross national income. The UAE was second, followed by Norway, with both countries contributing over 1%.

The UN calls for economically advanced countries to spend at least 0.7% of their gross national income on ODA; however, the chart shows that few countries have met this target.