Foreign Aid and Factors Determining Its Effectiveness on Poverty Alleviation in Ethiopia

Economic development and poverty alleviation are central agendas in Ethiopia where millions of its people are below the poverty line. This article applied a qualitative approach mainly relying on secondary data in dealing with the role of foreign aid and factors determining its effectiveness in contributing to the poverty alleviation efforts in Ethiopia. The economic sector mainly the agriculture sector is believed as the backbone of the country’s economic development and poverty alleviation a means of subsistence and a source of raw materials for its light industries. Foreign aid is believed to contribute to the poverty alleviation efforts in the country but its effectiveness is questioned and debated for many reasons. Some scholars and development practitioners argue for the positive role aid plays in poverty alleviation while others argue against its positive contribution. There are also arguments on aid conditionality, pointing out preconditions to make aid effective in poverty alleviation efforts. This group believes in addressing factors hindering aid effectiveness. In Ethiopia, institutional capacity, poor government expertise, low commitment and poor leadership quality, corruption, and donor interests and procedures affect aid effectiveness. Policy actions are recommended to deal with the factors affecting aid effectiveness and improve its role in poverty alleviation efforts in the country.