Impact of Foreign Aid on the Economic Growth of the Recipient Country: A Case Study of Pakistan

Abstract

Developing countries often experience many economic complications such as sluggish growth in GDP, lower per capita GDP, poor balance of trade and lack of investment in the economy. Many developing and under-developed countries including Pakistan hence require funds in the form of Aid, Grant or Loans from developed nations, international financial institutions and consortiums. This paper investigates the effectiveness of foreign aid on economic growth of Pakistan approaching different economic indicators. It has been analyzed that foreign aid impacts economic performance of Pakistan through various channels of Investment and Government expenditures in short and long run while aid has a long run relationship with trade openness in Pakistan.

Keywords: Foreign Aid, Economic Growth