Comparative Study of Global Role of Foreign Aid in the Development and Associates Strategies for Pakistan

Topics: Development, Economics, Aid Pages: 16 (5460 words) Published: October 22, 2011

Jul 232008

Foreign aid plays very essential role in the overall development of a country provided it is utilized properly. Due to the scarcity of economic resources and others natural constraints every country needs the sufficient amounts of foreign funds in shapes of foreign aid. Generally foreign aid is granted to reduce the budget deficit, trade promotion and strategic considerations. Foreign aid can affect the macro and micro policies of the host country. Pakistan has been receiving foreign aid from many countries and international monetary agencies. It is also living fact that Pakistan has been graveyard of development projects financed by the many international donors. In principle foreign aid could be a major source of capital, fueling the growth of developing countries and helping to promote human development. To fulfill the two-gap theory developing countries have to rely on foreign aid. These two important gaps are the import-export gap and saving-investment gap. Pakistan like any other developing third world nation has been a recipient of foreign aid during its 50 years of existence. This aid has been in the form of grants, tied aid, project aid and huge inflows intended to keep the foreign exchange reserves at a safe level to cope with industrialization related liberal import policy. Foreign aid is a post World War II phenomenon. The World War II is supposed to be major point in the evolution of the world economy. Priorities were changed and new regional alliances were emerged in the world. New bitter economic realities were found and ties of friendship were tightened on the scale of loyalty and common interest. Motivating but confronting ideologies i.e. communism and capitalism were going parallel to parallel and waves of integration of the world economy was also affected. All these factors ultimately alter the overall scenario of foreign aids programs, diplomacy, and rules of the power. The motivation for foreign aid has evolved specially in during this period. In this analytical study many new dimensions of global foreign aid is explored and efforts are made to evaluate the worthiness of foreign aid. Pakistan is receiving foreign aid since the very beginning. But the overall economic stability and industrial growth, financial soundness and infrastructure strength is not good. Due to shortage of sufficient funds for economic development and poverty alleviation most of the countries of Africa, Asia and others parts of the world need foreign aid. In most of the case donors countries or international monetary agencies like IMF, World Bank, Asian Development Bank and Consortium imposed many conditions for foreign aid, which ultimately slow the economic development of these countries. This study may be useful to policy makers, financial analysts, economists and associates students and teachers of the commerce and public policy. INTRODUCTION

The two-gap theory suggests that foreign aid plays very important role in the development of developing countries. They have to rely on foreign capital inflows to fill two gaps: the import-export gap and saving-investment gap. However, foreign aid can also be granted for some others determinate like structural adjustment programmes, emergency relief, transformation of economies, political objectives of the donors and recipients etc. Foreign aid has also transformed entire sectors. The agricultural innovations, foreign investments, and policies that created the green revolution improving the lives of millions of poor people around the world-were financed, supported, and disseminated through alliances of bilateral and multilateral donors like World Bank, IMF, and Asian Development Bank The idea of foreign aid / assistance is very old...

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