The Association of Foreign Aid and Foreign Debt with Economic Advancements of Pakistan

This study investigates the impact of foreign aid and foreign debt on economic development of Pakistan using the time series data from 1979 to 2013. The study puts the foundation of empirically investigating the combined effects of foreign aid inflows and foreign debt on the development of Pakistan's economy. Results from empirical investigations confirm the statistical significant role of both variables in economic progress of the country. OLS results indicate that foreign aid has the major role in economic progress and impacts positively to stimulate growth process while foreign debt impacts negatively to the growth of Pakistan's economy. Co-integration results also confirm the long run relationship of foreign debt and foreign aid on economic development of the country. The study highlights the structural association of the variables and accentuates the need of curtailing hastening burden of external debts in Pakistan.