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Impact of Foreign Aid on Pakistan

Impact of Foreign Aid on Pakistan

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Published by alpha97
A brief overview on impact of Foreign Aid to Pakistan. The report is prepared to submit at our Business School. Information mostly taken from World bank and State Bank of Pakistan quarterly report. The report is submitted to Mr. Sadiq ul Huda, course instructor. We really own our gratitude to Mr. Huda for deeply inculcate the understanding about macro and micro economics. As we were studying the economics first time in our life the guidance and efforts of Mr. Huda was found amazing.
A brief overview on impact of Foreign Aid to Pakistan. The report is prepared to submit at our Business School. Information mostly taken from World bank and State Bank of Pakistan quarterly report. The report is submitted to Mr. Sadiq ul Huda, course instructor. We really own our gratitude to Mr. Huda for deeply inculcate the understanding about macro and micro economics. As we were studying the economics first time in our life the guidance and efforts of Mr. Huda was found amazing.

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Published by: alpha97 on May 02, 2010
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08/18/2014

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PREPARED BY:
SADIQ ABBASMALIK ALIHADI HASSAN MUKHI
FOREIGN AID ANDPAKISTAN ECONOMY 
 
 The Role of Foreign Aid in the Pakistan Economy EMBA-BFS-2
nd 
BATCH Page 1 of 18 
INTRODUCTION
The misery of Under Developed Countries like Pakistan, which have the resources tobecome a prosperous country, however, have not fully achieved their potential, is mainlyassociated with the problem of
poverty 
. Because of low incomes, the saving ratios alsoremain low, resulting in low investment levels. At the same time, due to low income thetaxable capacity remains lower, i.e. government earnings also remain low. Due to low levelsof investment along with the low income on the part of the government the country facessaving-investment deficit as well as the deficit in balance of payments.The theory of Two Gap Model suggests that theeconomicdevelopment policy focuses ontwo constraints: the need for savings to finance investment, and the need for foreignexchange to finance imports
. The Two-Gap Model suggests that developing countries haveto rely on the Foreign Inflows to fill these two gaps. The Foreign Inflows are available invarious manifestations to a country, which includes the grants, loans, foreign directinvestment (FDI), export credit, project/non-project assistance, technical assistance andemergency relief etc.Moreover, the nature of the FI available to a country also depends upon various factorshowever mainly on the size of the country its economic circumstances. African nations relymainly on the foreign aid however countries in East Asia enjoy the benefit of foreign directinvestments owing to their investor friendly policies and the availability of infrastructure inthe form of land and human resource. In case of Pakistan the foreign aid is mainly in theform of foreign aid because it lacks physical, financial & human capital as well as political &macroeconomic stability, which are the main attraction for foreign direct investments.
 
 The Role of Foreign Aid in the Pakistan Economy EMBA-BFS-2
nd 
BATCH Page 2 of 18 
PURPOSE OF THE STUDY
As mentioned in the captioned subject, our purpose of the study is to assess the role offoreign aid in the economy of Pakistan. In this regard we would explorea) Sources of the Foreign Inflows available,b) The Role of Donor Agencies ,c) Assessing the impact of Foreign Aid,d) Trends and Composition of Aid; ande) Conclusion

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