Effectiveness of foreign aid in the light of millennium development goal on the education sector: a case study of Pakistan

Aid recipient developing countries have remained stagnant and they are becoming more aid dependent after receiving large amount of aid from developed countries. This reality provokes vigorous debate on the effectiveness of aid. This study analyzes the effectiveness of aid in the education sector of Pakistan during the period 1973-2008.This study focuses on the second Millennium Development goal, which attributes to achieve universal primary education. We estimate econometric model to test the short run and long run relationship between foreign aid and gross primary enrollment in the education sector of Pakistan. For this purpose, Augumented Dickey Fuller test, Johansen Likelihood Ratio test and Vector Error Correction Methods are used. The results show that foreign aid has significantly increased primary school enrollment in Pakistan. The results proved the short run as well as long run relationship between foreign aid and primary school enrollment.