Foreign Aid and Economic Development: The Case of Pakistan

  • Ihtsham Ul Haq Padda Federal Urdu University of Arts, Science and Technology


The lack of foreign reserves is a major issue for the development of developing countries. In such a scenario foreign aid plays an important role in development. However, loans and grants can have opposite impacts. This study evaluates the role of foreign aid in the development of Pakistan. The ARDL technique is used for estimation. The results depict that foreign aid has adverse effects on development both in the short-run and long-run. It is also found that in the short run the role of IMF is positive but insignificant. However, in the long run, it is insignificant. It is worth notable here that during the IMF program the government remains vigilant in the utilization of debt for productive purposes and when the IMF program ends the government again becomes slapdash in the utilization of the resources. The best alternative for the development policy is to minimize dependence on foreign economic assistance and rely on internal resource generation by widening the tax base, increasing and diversifying exports, etc. However, if survival is intricate without foreign aid, an impact assessment should be done.



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How to Cite
Padda, I. U. H. (2024). Foreign Aid and Economic Development: The Case of Pakistan. Empirical Economic Review, 7(1).