External Aid's Effect on Fragility and Fragility Regimes in Africa

Abstract

ABSTRACT External aid is central to Africa's development finance, yet many countries remain fragile. Using a panel of African countries (2006–2022), this article tests whether aid reduces fragility and affects movement across fragility regimes. Using a dynamic specification, System Generalised Method of Moments (GMM) results suggest that aid is associated with lower fragility, though the effect is modest, consistent with aid supporting short‐run stabilisation when it reinforces core state functions within domestic institutional frameworks. However, results from a conditional mixed‐process (CMP) ordered model that accounts for endogeneity in aid allocation indicate a more limited effect on regime change: aid is associated with a lower probability of movement into the least fragile regime and a higher probability of remaining in an intermediate fragility regime. Overall, the evidence supports a ‘stabilisation versus transformation’ pattern: aid may help contain deterioration and reduce fragility at the margin, but it does not automatically generate the deeper institutional and adaptive changes required for movement into the least fragile category. The findings imply that development cooperation should place less emphasis on aid volumes and more on predictable, multi‐year support targeted to institutional strengthening, shock management capabilities and social cohesion.

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