Abstract
This research paper aims to find out the relationship between Official Development Assistance and sustainable development in Pakistan. Time series data was taken for the period of 42 years (1976 -2017). Sustainable Development is a dependent variable for which proxy variable of Adjusted Net Savings has been deployed. ODA (% of GNI), Inflation, Per Capita GDP and Trade (GDP %) have been used as explanatory variables. Augmented Dickey-Fuller Test has been applied to examine the nature of the data as time series data may contain unit root problems. ADF test confirms mixed order of integration for the selected variables, hence Autoregressive Distributed Lag (ARDL) Approach was applied to find out the long-run relationship among the considered variables. Estimation of Error Correction Regression resulted in a significant long-run relationship between ODA and Sustainable Development. ECM Regression also signifies the negative and significant value of the speed of adjustment term confirming that the model is stable and convergent towards the equilibrium. Overall results of this study confirm a positive and highly significant relationship between ODA and the measure of sustainable development in Pakistan. Therefore it is recommended that attention should be given to drawing on foreign assistance and it should be subject to the transparent and efficient practices applied in the Aid Allocation. It significantly improves the overall welfare of Pakistan.
Highlights
Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD) introduced the terminology of Official Development Assistance (ODA) for the foreign funding transferred to developing countries. (Radelet, 2006) Foreign inflows normally include non-repayable grants, soft loans with tight conditions, project and non-project assistance, technical backing and relief aid packages foreign direct investment, credit for BOP imbalance etc
This study investigates the impact of foreign aid and sustainable development of Pakistan across the period of 1976-2017
This study explores the impact of Official Development Assistance on the Sustainable development of Pakistan for the period of 1976-2017
Summary
Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD) introduced the terminology of Official Development Assistance (ODA) for the foreign funding transferred to developing countries. (Radelet, 2006) Foreign inflows normally include non-repayable grants, soft loans with tight conditions, project and non-project assistance, technical backing and relief aid packages (natural disaster relief packages) foreign direct investment, credit for BOP imbalance etc. Foreign aid may be granted by multilateral institutions, like IMF, World Bank, Agriculture Organization and OECD etc. The resources are transferred from institutions to the Government of developing countries. Development studies have identified, the low level of domestic savings serves as a bigger challenge for the pace of the economic growth of developing countries. It is taken to be a big barrier in the growth rate of capital accumulation to meet the underlying investment opportunities and accelerate the pace of economic development. It becomes challenging for the developing countries to put the economy on the path of sustainable growth rates. External resources transferred to the poor countries can fill twin gaps; foreign exchange gap and saving gap (Papanek, 1973)
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