SIGNATURE WORK
CONFERENCE & EXHIBITION 2022

The impact of foreign aid on a nation’s socioeconomic and development indicators is still contentious on theoretical and empirical bases despite the extensive scholarly literature on the subject matter. While the majority of relevant academic discourse hinges on the impact of foreign aid inflows on economic growth, this study aims to analyse the relationship between foreign aid and corruption in Pakistan. The paper only considers Official Development Assistance (ODA) to narrow down project-oriented aid and reduce aid fluctuation, while distinct corruption indicators such as the ICRG, WGI, and CPI are utilized. This paper hypothesises that existing corruption in Pakistan lowers the absorptive capacity of foreign aid, thereby reducing the intended benefits of the aid, while continuing aid inflows fuel greater corruption and aid dependence, adversely impacting governmental accountability, therefore, resulting in a self-perpetuating cycle. The analysis builds upon major findings in relevant literature and demonstrates the correlation between foreign aid and corruption in Pakistan. Furthermore, specific sectors of the Pakistani economy i.e. the health and education sectors, are utilized as case studies to examine the impacts of foreign aid and the role of corruption in project outcomes. The study is significant as it realises the possibility of a self-perpetuating cycle as a result of the Pakistani foreign aid-corruption nexus.