The Effect of Official Development Assistance on Domestic Savings and Economic Growth in Egypt

Abstract

The Egyptian economy has passed through several overlapping phases of economic development over the last decades, starting in 1950s. However, the launch of the Open Door Policy in 1974 allowed a greater role for official development aid funds to finance economic growth. In economics literature, the role of foreign aid in financing economic growth and complementing domestic savings has been controversial. This paper firstly, outlines in general main types and channels of foreign aid; secondly, gives a historical overview of foreign aid and thirdly; investigates the impact of official development assistance on domestic savings and thus on economic growth in Egypt over the period of 1965 to 2020 according to data available from the World Bank. The empirical analysis is conducted through a two-equation model through which the researchers have concluded contradictory results where foreign aid positively affects gross domestic savings and negatively affects economic growth.