The Role of Foreign Aid in the Development of Pakistan’s Education Sector: A Time-Lag Analysis

Abstract

This study examines the role of foreign aid in the development of Pakistan’s education sector by using the time series data of foreign aid and educational outcomes (number of schools, students, teachers and literacy rates) from 1967 to 2010. Time lag analysis shows, the foreign aid of the current year (T) has no impact on educational outcomes. However, foreign aid of the previous year (T-1) had a significant positive effect on all educational outcomes. Similarly, financial aid received by the country two years previous (T-2) also established a positive relationship with all the education development indicators, except literacy rates.