The Impact of Foreign Aid on Education in Pakistan

Abstract

Foreign Aid (FA) is an important determinant of economic growth in the developing world and especially countries like Pakistan, where development needs could not be financed by the government due to limited domestic resources. FA supplements domestic resources of finance such as savings and also enhances the amount of investment and capital stock in the country. Education is also a one of the major contributors of economic growth. In countries like Pakistan education also plays a vital role in political stability where institutions are not sound enough. The Major objective of the study is to check the effectiveness of foreign aid for education in Pakistan. This study has been primarily conducted using a time series data set for Pakistan over the period 1975 to 2010. The variables of interest are foreign aid and education, other variables are investment and openness to foreign trade. For empirical analysis ARDL techniques of co-integration developed by Pesaran and Shin (Ghorbani & Motallebi, 2009) have been used. The results show positive relationship between foreign aid and education. The study has relevance as far as policy decisions are concerned for foreign aid.