Foreign aid: An agent for socioeconomic development? A case study from an emerging economy: Pakistan

Abstract

AbstractPakistan's economy since its creation has remained heavily dependent on foreign aid, especially to manage the ever‐widening gap between the available financial resources, development expenditure, fiscal deficit, and current account deficit. This article critically evaluates the effectiveness of foreign aid in Pakistan from 2000 to 2022 via an in‐depth literature review and the rational actor model (RAM). Furthermore, a mixed‐method approach based on descriptive quantitative and in‐depth qualitative research methods was adopted for this study. The article demonstrates that RAM can assist policy makers, enabling them to make decisions vis‐à‐vis foreign aid while safeguarding national interests, particularly economic interests. However, this study finds that for Pakistan to achieve sustainable economic growth, increasing exports and attracting more foreign direct investment hold greater potential than continued reliance on foreign aid. In conclusion, the article prescribes policy measures to restructure Pakistan's political system to foster socioeconomic development through trade liberalization and good governance.Related ArticlesAsongu, Simplice A., and Joseph Nnanna. 2019. “Foreign Aid, Instability, and Governance in Africa.” Politics & Policy 47(4): 807–48. https://doi.org/10.1111/polp.12320.Dobransky, Steve. 2014. “Violators amongst Us: International Regimes and the Role of Compliance, a Case Study on Official Development Assistance.” Politics & Policy 42(4): 593–634. https://doi.org/10.1111/polp.12082.Scarlato, Margherita, and Giorgio d'Agostino. 2019. “The Political Dimension of Cash Transfers in Latin America and Sub‐Saharan Africa: A Comparative Perspective.” Politics & Policy 47(6): 1125–55. https://doi.org/10.1111/polp.12332.