Disaggregated UN foreign aid and economic growth in Afghanistan, 1990-2023

Abstract

This thesis examines the relationship between disaggregated UN foreign aid and economic growth in Afghanistan over the period from 1990-2023. This study breaks down aid flows provided by United Nations agencies such as the United Nations Development Programme (UNDP), the United Nations Children's Fund (UNICEF), the United Nations Population Fund (UNFPA), and the World Food Programme (WFP) to examine their impact on economic growth in Afghanistan. The study identifies both the short-run and the long-run effects on GDP per capita using the Autoregressive Distributed Lag (ARDL) model. The findings reveal that foreign aid does not have a uniform impact on Afghanistan's economic growth. No long-run effect is identified for any agency and the error-correction term is positive, but insignificant, given the sample of observations is limited to 34 and the long-run implication is not strongly identified. However, disaggregated aid exhibits heterogeneous effects. In the short run, UNFPA aid has a positive and statistically significant effect on GDP per capita, suggesting that investments in health and population programmes contribute to human capital development and economic performance. In contrast, WFP aid shows a mixed short-run pattern: a significant negative contemporaneous effect, reflecting its consumption-oriented humanitarian role, followed by a significant positive effect after four years. Overall, the results suggest that the effectiveness of foreign aid depends on its type, timing, and institutional channel. The findings further indicate that strengthening institutional capacity, improving governance, and prioritizing development-oriented assistance are essential to enhance the long-term effectiveness of foreign aid in supporting sustainable economic growth in Afghanistan.