EXAMINING THE EFFECTS OF FOREIGN AID ON ECONOMIC DEVELOPMENT, THE CASE OF CAMEROON

ABSTRACT

This research work examined the effect of foreign aid on economic development of Cameroon. The researcher had the following objectives, to find out the link between economic development and foreign aid and to access the effect of public debt and government expenditure on the economic development of economic, The research had specific objectives to examine the impact of foreign aid on the agricultural sector of Cameroon.

The research. The study recommends that the government should invest more in agriculture as it is the backbone of Cameroon economy, the researcher equally recommends that the money received from aid should be handed directly to the person’s concern to avoid embezzlement and mismanagement of funds

CHAPTER ONE
INTRODUCTION

1.1 Background of the study
Aid, Economic growth and Economic development are burning issues confronting development economist and researchers today. This is simply because some of the researchers support the view that foreign aid lead to growth while others argue that aid does not contribute to

Economic growth and this have a negative impact on Economic development in the recipient country (Baviah,2003)
Globally speaking, eternal sources of financing development constitute a vital source of development finance in many countries especially of the developing world. These external finances take the form of foreign Aid, loans or external debt, foreign direct investments (FDI), remittance, portfolio investments, concession credits as well as bonuses and are mostly given by capitalist surplus countries, friendly organization of international repute, banks, unions, non- governmental organization as well as private entities.

This is probably how mercantilist nations chose major pre- occupation was to have capital or trade surpluses often given out these surpluses as loans, grants or aid and bonuses to their trading partners (IMF, African Development Banks, 2007).
The Advent of the industrial revolution of 1700s in Europe also led to capital surpluses in industrialized nation’s such as Germany, France, Britain and America who in turn gave out and are still giving surpluses in the form of loans, foreign aid and grant to needy countries especially those of the third world (World Bank Group, 2007).

Continually, Africa Short of her domestically generated funds, has no lukewarm attitudes towards external sources of finance. This is seen in the fact that most African countries in general and Cameroon in particular, in their underdeveloped capacity strive to attain modalities to quality for Grant and even loans which they are expected to repay. For example, in January 2001, the Paris club creditors agreed to restructure Cameroons public external debt under the enhanced heavily indebted poor countries (HIPC) . Initiative bringing to reduction in total debt services from us and 410m in 1999 to a projected us$242m in 2002(Africa Development Banks and IMF 2008).

They also try as much as possible to create conducive political and economically stable environment to attract foreign investments.
Cameroon as a developing and poor country does not neglect external sources of finance. With it natural resources, Cameroon has diverse sources of finance to enable her develop economically and infrastructural. However, just as many of our counterparts in the developing world and Cameroon in particular, under exploitation of her resources coupled with lack of appropriate policy implementation, economic mismanagement, corruption, a difficult business environment for both local and foreign investors as well as monetary policies, Cameroon is able to finance up to 30% of its projects from internal sources.

For this reason, she turns to external sources to finance to supplement the meager internally generated finances so as to stimulate Economic growth and development (IMF, Africa Development Banks, 2007). These external finances often take the form of foreign direct investments, grant loans as well as purchase of bunds from external markets. These finances are mostly provided by Cameroon’s friendly countries such as China, Japan, Korea, Germany, USA and others. Also international organization such as the UNO, the AU, EU as well as banks such as the IMF and the Africa Development Banks all provide external finance to Cameroon.
1.2 Statement of the problem
Economic growth and development is known to be one of the major microeconomics policy objectives of the Cameroon economy. In doing her best to achieve this objectives, Economic, financial and socio-political resources as well as natural resources are mobilized. The government of Cameroon has tried to maximize the use of its internally generated finance in order to achieve economic growth and development. Yet the degree of achievement of these objectives is very small perhaps due to Economic mismanagement, corruption and lack of adequate finance to promote growth. Thus, external sources of finance are being looked upon as a lender of last resort by the economy. It is for this reason that this research study has a task to assess the impact of foreign aid to the economic development of Cameroon.
1.3 Research questions
1.3.1 General Question
What effect does foreign aid has on economic development of Cameroon?
1.3.2 Specific Questions
1. How effective does government debts and government expenditure affect the economic development of Cameroon
2. What link exist between foreign aid and economic development of Cameroon
1.4 Objectives of the study
1.4.2 Main Objective
To examine the effect of foreign aid on the overall economic development of Cameroon.
1.4.2Specific Objectives
To assess the effect of public debt and public expenditure on the Economic development of Cameroon.
To examine the impact of foreign aid on the agricultural sector of Cameroon
1.5 Research Hypothesis
To create a link between the question this work is about to answer and to achieve, the main objective of the study. The work is based on the following Hypothesis.
Ho Foreign aid has no significant effect on the economic development of Cameroon.
1.6 Limitation of the study 

Some of the participants were difficult to meet for interview due to commitments which delayed the collection process in terms of time. This was overcome by using secondary sources that reflected the views of targeted population. Some of the participants were reluctant to participate once selected while others were slow to returning the fully filled questionnaire. This was manage through explaining to the participants the purpose of the study and by continues follow up of the distributed questionnaires. The printed questionnaires were higher than the sample which was an efficient way to overcoming the challenge of lost questionnaires as it was easy to re-distribute. Despite the challenges, the study collected sufficient information that enabled analysis and presentation.
1.7 Significance of Justification of the study