Working Paper
Do countries use foreign aid to buy geopolitical influence?

In recent years, donor countries have increasingly used different aid allocation channels to boost aid effectiveness. One delivery channel that has grown tremendously is ‘multi-bi aid’—contributions to multilateral organizations earmarked for specific development purposes.

This article examines whether donors use multi-bi aid to further their selfish goals—specifically, to garner political support for their ambition to become a temporary member of the UN Security Council. In this context, multi-bi aid is particularly beneficial to countries with limited experience as foreign aid donors; whose governance quality is weak; and which are more internationalized. Using a sample of OECD/DAC donor countries in 1995-2016, time-series cross-section analysis corroborates these arguments. The analysis draws on a new dataset of media reports proxying for donor interest in winning a temporary seat in the UN Security Council and extended data on multi-bi aid flows.

The findings demonstrate that multi-bi aid may be a tool for geopolitical influence, with yet unexplored consequences for aid effectiveness.