on the economy of
Pakistan
By Zahra Amjad
Content
Introduction
why foreign aid?
Definition of foreign aid
Types of foreign aid
Institution
Origin/ history of foreign aid
Effectiveness of foreign aid
Does aid is effective for growth or not?
Positive as well as negative effect
Conclusion
references
Why foreign aid?
Foreign aid plays very essential role in the
overall development of a country provided it
can be utilized properly.
2nd world war b/w American allies (uk , us ,France and the
German allies Germany, Japan, Italy)
Building
Promote education
infrastructure
Subsistence
Stabilized
consumption
economy
Of food
We can take hare an example of problems and relief
activities for earthquake victims in 2005 & flood
victims in 2010.
The foreign assistance helps in the establishment of
the industrialization in the country
Foreign aid stimulate domestic enterprise
Good governance and quality economic policies
may increase the chance of bright future that will be
free from poverty, economic dependency political
instability and scarcity of the resources.
Negative effects
After getting sovereignty of a country is lost
Increase unwanted political exploitation.
Unsuited economic conditionality
The burden of debt servicing increases all the
time
The tied loans given to developing country
tends to increase the inflation rate.
The cost of foreign aid is very high if it is not
utilized properly. Specially in the case of
Pakistan .
Unnecessary foreign aid is like a slow poison
and beggars have no choice but to live with
indignity.
Fungible source
Y=C+I+G+(X-M)
AID is using for none development
expenditure instead of development purposes
Fungibility means aid is taken for
development and use for non development
purposes it raises the government s non
developmental expenditures
It also leads to Dutch disease
Negative effects con…..
There is theft of 600 billions of different taxes
in Pakistan and revenue of 143 billion is
wasted through smuggling every year. Corrupt
elites of politicians and bureaucrats have at
least $ 50 billions in the foreign banks.
Too much dependency on foreign aid effect
the sovereignty of any country.
Aid seemed to have substituted for domestic
savings, increase debt burden.
Effectiveness of foreign aid
Hicks (1975) presented that , it would be stupid to
claim that the effort were purely humanitarian or
disinterested
In Pakistan aid is not effective in a sense that this aid
is becoming a cause of more debt burden in Pakistan
Aid= grants + loans
Earlier
Grants Loans
70-80% 20-30%
Now
Grants Loans
20-30% 70-80%
conclusion
It is estimated that a $10 Foreign aid would
lift 25 million people a year out of poverty but
only if it favors countries with sound
economic management.
Donors are actually allocating aid to facilitate their
FDI, MNC’s.
Recipient Colonial Past.
Foreign aid fails as a development policy
it extends the power of ruling elites
recommendations
It leads the third world away from the free market.
reductions in non-development expenditures
reducing the fiscal deficit,
employment opportunities for the poor in both
rural and urban areas.
by providing energy at a competitive cost,
The fate of the nation is changed by the will of
its people and political leaders not by the
foreign masters.
“mareez ko dawa kay saath saath dua kee bhee zaroorat hai”
Bibliography
The economy of Pakistan Khawaja Amjad Saeed
Foreign. Aid by Jagdish Bhagwati and Richar and
Seants A. P Thrill Wall,
Growth and Development with special references to
developing economies.
Jhingan M.L. International Economies 2nd edition,
Konark Publisher (Pvt) Ltd. Delhi
Todaro , Michael p.(2001). Economic Development
Mahmood Azhar, the role of foreign aid in economic
development of Pakistan.