(Policy Brief Submitted October 2007, for Econ 346 - Economic Development, Lafayette College) Foreign aid has become a topic of concern on the international stage. Development economists are assessing whether foreign aid is actually effective, either through poverty reduction or growth. There is little evidence that households actually lose out when foreign aid is distributed thereby making the aid ineffective, but this is not the focus of this paper. The following brief presents conditions found to be the important prerequisites of growth based on economics literature. Considering (a) the existence of market failures in developing countries (Dercon 2003) and that (b) “raising aid effectiveness is a matter of improving the framework conditions, of setting new priorities and of finding new operational means” (Langhammer 2004), this brief recommends restructuring foreign aid so it is specifically allocated to (1) improving governmental structures and accountability, (2) funding social