Effectiveness of Foreign Aid and Human Development

Foreign aid has been contributory towards fostering broad-based development and complementing national development initiatives in the recipient countries. This paper analyses the question of aid effectiveness towards the achievement of goals in the special context of a set of social outcomes in Pakistan. More specifically, the paper focuses the core question that ‘how’ and ‘how far’ foreign aid has affected the ‘health’, ‘education’, and overall ‘human development index’ in Pakistan. Our result shows that there is feedback Granger causality between GI and ODA. That is, Economic growth induces ODA and ODA Granger cause economic growth. As far as Education index, Human development index and life expectancy index concerned, there are only unidirectional Granger causality from ODA to Education index, Human development index and life expectancy index. This is consistent with other literature that ODA contribute to human development.