Ethiopia is one of the least developed nations in the world. The primary root causes of thernunderdevelopment of this country are absence of peaceful transition of political power, goodrngovernance and democracy. There is close relationship between economic development andrndemocracy. As many researches indicate presence of democracy in one country acceleraterneconomic development and tranquility of the state. The development hypothesis underlyingrngood governance that reduced conflict is essential to bring about economic growth andrnaddress the challenges of vulnerabi lity to famine, hunger, and poverty.rnMany scholars argue that "democracy may be created and mid-wifed by foreign powers"rnHowever since donors have no representation in any country as a ci tizens to change policiesrnand stmggle for citizens empowerment what they can do is either to exert their influencernthrough financial donation or financing as well as sharing experience to nationals as well asrninstitutions of local origin that work for the democratization and fonnation of goodrngovernance.rnForeign aid could playa paramount role for the development a country as it did in otherrncountries of Europe. Even thought foreign aid could play to foster economic growth as wellrnas democracy in most developing countries including Ethiopia. Nevertheless the aid providernto Ethiopia couldn't bring the anticipated democracy and good governance. This seems as arnresult of the donors' conviction that providing emergency aid, military aid and teclmicalrnassistance are their priority rather than disappointing the government by pledging thernquestion of good governance, and democratizations mmmage in return for their aid. Besidesrnthe amount of aid exerted fro the democratization is scanty. Donors' prime objective isrngratifying their national interest in the region than to democratize Ethiopia. Besides allrnregimes in the country were not willing to accept any conditionality that contradict withrninterest. It is hardily possible to use aid as a means to bring democracy and good governancernwith out political will of people in power. Democracy and good government can berncultivated merely by the political will of government in power or after fundamental groundsrnsuch as pluralistic culture, economically independent society, and culture of peacefulrntransition of power facilitate in a country.