Foreign Aid, Climate Variability, and Food Production in Somalia: Evidence from ARDL Approach

Abstract Climate change is a serious threat to agricultural production in developing countries, especially in those countries where agricultural production is highly reliant on rainfall and adaptive capacity is limited. Foreign assistance, however, continues to be an important source of investment for agricultural development, and its effectiveness in different climatic conditions is still not widely understood. This research investigates the contribution of foreign aid, climate variability and the interaction between them on food production in Somalia, with data on an annual basis from 1980 to 2022. The long run equilibrium relationship and short run dynamics between the variables food production, foreign aid, the Standardized Precipitation Index (SPI), temperature and economic growth are estimated by the Autoregressive Distributed Lag (ARDL) approach. The results show that there is a stable long run relationship between the variables. Foreign aid has a positive, though not statistically significant, direct effect on food production, whereas climatic conditions have a significant effect on agricultural performance. In particular, the relationship between foreign aid and SPI is positive and significant, suggesting that the impact of foreign aid is conditioned on climatic conditions and that foreign aid is more effective in boosting agricultural output when it is delivered in conjunction with resilient interventions or favorable climatic conditions. The error correction model also corroborates a tendency to move towards long run equilibrium after short run shocks. From these findings, it could be concluded that if foreign aid is not accompanied by climate adaptation measures, its effects on agricultural productivity will not be enough to achieve the desired positive results. It adds to the literature by integrating the relationship between foreign aid and climate variability into a single empirical framework and offers policy evidence to enhance climate resilient agricultural development and food security in Somalia and other climate vulnerable developing economies.