Foreign Aid

Developed countries provide developing countries with foreign aid so that they can overcome the problems they face as poverty, inequality, illiteracy, unemployment etc. Foreign Aid is bilateral and multilateral development assistance and private assistance provided by nongovernmental organisations. The bilateral aid basically includes the aid granted depending on the political conditions of the developed and the developing countries whereas multilateral aid is granted by the multinational companies of the developed countries. Moreover the other reason is as mentioned above that they also have a desire to fill the gaps that exist such as the saving investment gaps and the import export gaps. The United Nations Millennium Development goals (MDGs)

Pakistan receives an enormous amount of foreign aid but progress cannot be seen to such an extend. Critisim on Aid starts where it does not reach to the needy. A view point of foreign aid making a nation dependant and lazy is put forward many times. (Haidri 2010)

To examine the effect of foreign aid given to Pakistan on the education sector of the country.

Din and Haider(2013) studied the impact of aid on the economic growth of the country. Ramsey Cass Koopman's growth model has been used. Results show that foreign aid has a positive impact on the economy but good governance plays an important role but external debt has a negative role and and is the reason for creating burden on the country

Alan(2013) studied the impact of foreign aid on the economic growth of the country. Secondary data has been used where as government spending on education is the independent variable. Results conclude that the lack of management, poor planning and corruption are the reasons because of which aid is not being used

Time series analysis is used.The data is taken from the World Bank, for the period 1981-2013 which is about 30 years.

Literacy rate:

In Pakistan the basic definition of literacy is the ability to write your name . literacy rate of Pakistan is pretty low and is considered as one of the major hindrance in the country’s development. Gender gap in the literacy rate is evident in Pakistan with only 26% of girls liberate out of total 46%.

Foreign aid is basically a loan or liability given at discount price. The discount or concession is basically favours given by the developing countries such as they give a longer duration to pay back the loan and benefits such as payment of principal or capital is deducted. Pakistan receives a lot of foreign aid, US being the biggest donor. The question arises is that where is this aid gone.

Government expenditure on education

Government spending on education as percent of GDP is positively related with the literacy rate of the country. The more the government spends on education department; the literacy rate of the country will increase