ABSTRACT
This chapter investigates the effects of foreign aid on economic growth in low-income and non-low-income African countries. Stephane Pallage and Michel A. Robe noted that foreign aid is a major source of economic growth for developing countries, especially in Africa, where it averages 12.5" of the gross domestic product and establishes by far the most important source of foreign capital. The main role of foreign aid in stimulating economic growth is to supplement domestic sources of finance such as savings, thus increasing the amount of investment and capital stock. Foreign aid has a strongly positive impact on economic growth in low-income African countries, it is the Foreign Direct Investment (FDI) inflow that has resulted in a significant impact on economic growth for middle-income African countries. Many low-income countries in Africa do not have great opportunities for FDI because they receive limited attention from multinational companies.
