Summary

This paper analyzes the effects of foreign aid on institutional capacity building. The research
uses the Ministry of Finance, government of Afghanistan as the case for the study. The
hypothesis that whether or not foreign aid can help to develop institutional capacity in
developing countries is explored in this research study. This hypothesis was tested studying and
analyziVng the foreign donor funded capacity development programs at the Afghan Ministry of
Finance, while specifically focusing on the effects of foreign aid on institutional development.
While the findings of previous studies are generally mixed, the results of this study also indicate
that foreign aid has mixed (good and bad) effects on institutional capacity development.