Foreign Aid and the Fiscal Behaviour of Government of Pakistan
This study examines the effect of foreign aid on the fiscal behaviour of the Government of Pakistan. It applies the Autoregressive Distributed Lag model to analyse the relationship that prevailed between grant aid, domestic borrowing, domestic revenue and development expenditure allocations during the period 1960 to 2010. The results reveal that foreign grants have adversely affected government’s fiscal responsibility. In fact it has reduced domestic revenue collection while amassing foreign debt. During periods of fiscal imbalances when cutting expenditures should have been the norm, both development and non-development expenditures were allowed to increase. The results also show that these effects vary considerably in relation to the mode aid was delivered. There is much scope for efficient utilisation of foreign financial resources while the foremost need is to improve revenue collection and discipline expenditures. It is up to the government and not the donor whether it uses the grants for reducing domestic borrowing or spending or increasing aggregate availability of resources.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.pide.org.pk
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Binh, Tran-Nam & McGillivray, Mark, 1993. "Foreign aid, taxes and public investment A comment," Journal of Development Economics, Elsevier, vol. 41(1), pages 173-176, June.
- Lele, Uma & Goldsmith, Arthur A, 1989. "The Development of National Agricultural Research Capacity: India's Experience with the Rockefeller Foundation and Its Significance for Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 37(2), pages 305-43, January.
- Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-27, April.
- R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001.
"On the Empirics of Foreign Aid and Growth,"
EPRU Working Paper Series
03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
- Collier, Paul & Hoeffler, Anke, 2004.
"Aid, policy and growth in post-conflict societies,"
European Economic Review,
Elsevier, vol. 48(5), pages 1125-1145, October.
- Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
- John Hudson & Paul Mosley, 2007.
"Aid Volatility, Policy and Development,"
2007015, The University of Sheffield, Department of Economics, revised Oct 2007.
- Mohey-ud-din, Ghulam, 2005. "Impact of Foreign Aid on Economic Development in Pakistan [1960-2002]," MPRA Paper 1211, University Library of Munich, Germany.
- Feeny, Simon & McGillivray, Mark, 2010.
"Aid and public sector fiscal behaviour in failing states,"
Elsevier, vol. 27(5), pages 1006-1016, September.
- Feeny, Simon & McGillivray, Mark, 2009. "Aid and Public Sector Fiscal Behaviour in Failing States," MPRA Paper 21801, University Library of Munich, Germany.
- Henrik Hansen & Finn Tarp, 2000.
"Aid effectiveness disputed,"
Journal of International Development,
John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
- Collier, Paul & Dollar, David, 2002.
"Aid allocation and poverty reduction,"
European Economic Review,
Elsevier, vol. 46(8), pages 1475-1500, September.
- Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
- Dollar, David & Levin, Victoria, 2006. "The Increasing Selectivity of Foreign Aid, 1984-2003," World Development, Elsevier, vol. 34(12), pages 2034-2046, December.
- Dollar, David & Levin, Victoria, 2005. "Sowing and reaping: institutional quality and project outcomes in developing countries," Policy Research Working Paper Series 3524, The World Bank.
- Muhammad Shahbaz & Faridul Islam, 2011.
"Financial Development And Income Inequality In Pakistan: An Application Of Ardl Approach,"
Journal of Economic Development,
Chung-Ang Unviersity, Department of Economics, vol. 36(1), pages 35-58, March.
- Shahbaz, Muhammad & Islam, Faridul, 2011. "Financial development and income inequality in Pakistan: An application of ARDL approach," MPRA Paper 28222, University Library of Munich, Germany.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- McGillivray, Mark, 2000. "Aid and Public Sector Behavior in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 156-63, June.
- Osei, Robert & Morrissey, Oliver & Lloyd, Tim, 2005.
"The Fiscal Effects of Aid in Ghana,"
Working Paper Series
RP2005/61, World Institute for Development Economic Research (UNU-WIDER).
- Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-45, June.
- White, Howard, 1994. "Foreign aid, taxes and public investment: A further comment," Journal of Development Economics, Elsevier, vol. 45(1), pages 155-163, October.
- Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
- Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
When requesting a correction, please mention this item's handle: RePEc:pid:wpaper:2013:96. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal)
If references are entirely missing, you can add them using this form.