What Is Foreign Aid?

The term foreign aid refers to any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant, or loan. Most people tend to think of foreign aid as capital, but it can also be food, supplies, and services such as humanitarian aid and military assistance.

Broader definitions of aid include any assistance transferred across borders by religious organizations, non-governmental organizations (NGOs), and foundations. U.S. foreign aid usually refers to military and economic assistance provided by the federal government provides to other countries.

Key Takeaways

  • Foreign aid is any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant, or loan.
  • Countries may provide aid through capital, food, supplies, and services such as humanitarian aid and military assistance.
  • Developed nations may provide developing nations with foreign aid after a natural disaster, times of conflict, or during an economic crisis.
  • The United Nations requires advanced countries to spend at least 0.7% of their gross national income on international aid.
  • The United States is the most generous, according to the Organisation for Economic Co-operation and Development.

Understanding Foreign Aid

As noted above, foreign aid is any type of assistance that one country's government provides to another nation, usually from developed to developing nations. Governments may issue aid in the form of:

  • Money
  • Food and supplies
  • Medical assistance including doctors and supplies
  • Humanitarian aid such as relief workers
  • Training services including agricultural training
  • Health care
  • Education
  • Assistance with infrastructure building
  • Activities related to peacebuilding

Governments may make agreements with the countries to which they provide assistance. For instance, a developed nation may agree to provide grants to those in need after a natural disaster or during times of conflict, whether they provide any type of capital or humanitarian aid. Or a government may agree to issue loans to an allied nation that experiences economic uncertainty with special repayment provisions.

Concerned about where foreign aid goes? Only a small portion of American assistance goes to federal governments, while the rest is assigned to non-profits, NGOs, and other organizations.

According to the Organisation for Economic Co-operation and Development (OECD), member countries contributed $152.8 billion in international aid in 2019. This was divided into:

  • $149.4 billion in capital grants and loans
  • $1.9 billion to develop private sector vehicles for growth
  • $1.4 billion worth of loans and equity to private companies
  • $100 million in debt relief

The United States is the most generous, according to the OECD, providing $34.6 billion in foreign aid in 2019. The remaining countries that were among the top five donors included:

  • Germany: $23.8 billion 
  • The United Kingdom: $19.4 billion 
  • Japan: $15.5 billion 
  • France: $12.2 billion

The United Nations (UN) calls for economically advanced countries to spend at least 0.7% of their gross national income (GNI) on international aid. Turkey, Denmark, Luxembourg, Norway, Sweden, and the United Kingdom are the only countries that met or exceeded this level. The total contribution of member countries, though, averaged 0.3%—much lower than the UN target.

According to Security Assistance Monitor, the Middle East and North African region received the most assistance, which amounted to more than $1.195 billion in 2018 followed by the Sub-Saharan Africa region, which received about $965 million. The countries that received the most aid that year were Afghanistan, Jordan, Kenya, Tanzania, and Uganda.

Special Considerations

Foreign aid estimates tend to vary, given the different agencies, funding methods, and aid categories associated with U.S. foreign assistance efforts. For instance, the Congressional Research Service (CRS)—a nonpartisan organization—the country spent $46.89 billion in foreign assistance during the 2018 fiscal year. That figure amounted to 1% of the total federal budget authority.

Aid can be provided by governments directly or through special federal agencies. For instance, the United States Agency for International Development (USAID) was created in 1961 to provide civilian aid. It provides assistance with education, environment, climate change, global health, crises and conflicts, food and agriculture, water, and human rights.

History of Foreign Aid

Foreign aid—also commonly referred to as international aid and economic aid—isn't a new concept. 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 totaled $50.1 billion by August 1945. The United States also contributed $2.7 billion 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 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 the country's gross domestic product (GDP).