Institutional Capacity and the Limits of Foreign Aid
Institutional capacity is the difference between temporary relief and self-sustaining development. Foreign aid can finance urgent needs, save lives, support public health, expand education, stabilize crises, and help countries overcome poverty traps. But aid cannot permanently substitute for the institutions required to govern, finance, deliver, maintain, and adapt public systems over time. This article examines foreign aid as an Institutions & Governance problem, asking when external assistance strengthens domestic capacity and when it creates dependency, parallel administration, donor fragmentation, or weakened accountability. It argues that durable development depends less on aid volume alone than on whether aid builds fiscal systems, public administration, service delivery, local ownership, sovereignty, legitimacy, and long-term public trust. Aid works best as temporary scaffolding: support that helps societies build institutions strong enough to make aid less necessary over time.


