Monthly Economic Monitoring of Ukraine No 231, April 2024
Foreign Aid to Pakistan: Understanding Complexities and Constraints
1. Foreign aid to Pakistan:
Understanding Complexities
& Constraints
FAHEEM JEHANGIR KHAN
Sr. Research Fellow,
Pakistan Institute of Development Economics, Islamabad
PIDE Series of Roundtable Discussions on ‘Foreign Aid to Pakistan’
7th August 2020 | PIDE, Islamabad
2. FJK (PIDE 2020)
Aid Effectiveness?
Extensive research and analytical work in the last six
decades
Contribution to development is still contested
The evaluation of foreign aid outcomes (or aid
effectiveness) dominates the aid debate.
Rarely considered the practical working of the aid
policy process – specifically, how aid decisions are
managed and transformed into action.
2
3. FJK (PIDE 2020)
Complexities & Constraints
Complexities of Aid Delivery System
Massive Aid Industry
Complex Aid Delivery System
Multilevel Aid Policy Process
Constraints involved in managing Aid Policy Process
Public Policy & Economic Growth
Public Sector Capacity & Donors’ Technical Assistance
Multiplicity of Aid Suppliers, Recipients, & Activities
3
4. FJK (PIDE 2020)
1. Aid Industry
With steady evolution of global events, the aid
delivery system has transformed considerably.
Numbers of official aid agencies, their partner
organisations and budgets have grown enormously.
Aid architecture has changed substantially - the aid
landscape now includes multiple players that
channel significant volumes of foreign assistance
both at the supply and recipient ends.
4
5. FJK (PIDE 2020)
1. Aid Industry (Contd.)
153 international donors provided official
development assistance to 146 recipient countries
globally, in 2017 (OECD Creditor Reporting System, 2020)
263 multilateral aid agencies gave funds to
promote development while 56 countries provided
bilateral foreign assistance through several
agencies (Fengler & Kharas, 2010)
Some 500,000 people are directly involved in the
international aid delivery system (Moyo, 2010)
5
6. FJK (PIDE 2020)
34 Bilateral Donors
33 Multilateral Donors
(21 UN agencies)
2144 Projects
38 Divisions of 35 Federal Ministries
161 Provincial Departments,
autonomous bodies and institutes
100,000 to 150,000 active NGOs,
CSOs, INGOs, R&D Institutes
Consultants
Think Tanks
Contractors
Political Groups
Academia
Mass Media
Bureaucracy
1. Aid Industry (Pakistan)
Source: Khan, F.J. (2020)*
6
10. FJK (PIDE 2020)
INPUTS
Aid policies/strategies
Aid modalities
Resource commitments
Aid disbursements
OUTPUT
Project/Program
completion
Task/Target achieved
OUTCOMES
Benefits
Aid Policy Process
Aid Policy Network
3. Aid Policy Process (Contd.)
Speaker’s own illustration
10
11. FJK (PIDE 2020)
3. Aid Policy Process (Contd.)
Numerous stages and steps (or process activities)
are involved in managing the aid policy process in
Pakistan.
A LOAN MANAGEMENT PROCESS involves 6 phases,
some 22-25 stages, and 150-162 steps
A GRANT MANAGEMENT PROCESS involves some
13-16 stages and 86-98 steps in 5 phases
Source: EAD Process Management Manual
11
12. FJK (PIDE 2020)
3. Aid Policy Process (Contd.)
Source: Khan, F.J. (2015)
12
15. FJK (PIDE 2020)
5. Public Sector Capacity & Donors
Technical Assistance
Considerable shortages of technical skills in the
public sector in Pakistan
Severe shortage of research & project management skills
Considerable shortage of planning expertise, negotiation &
administrative skills
Shortages in budgeting skills and IT expertise.
Shortage of specialists and professionals
Underutilization of existing trained and
experienced staff in the public sector
15
16. FJK (PIDE 2020)
5. Public Sector Capacity & Donors
Technical Assistance
Reasons that undermine benefits of foreign training in Pakistan
Source: Khan, F.J. (2020)
16
17. FJK (PIDE 2020)
6. Multiplicity of Aid
(Suppliers, Recipients & Activities)
Presence of multiple donors and aid proliferation
imposes burdens on recipient governments
Undermines capacity to manage the aid policy process and
subsequently leads to dilution of aid efforts on the ground.
Multiplicity of donors and aid channels increases:
Transaction costs
Results in duplication of project activities
Weak donor-donor & donor-government coordination
Visibility factor
17
18. FJK (PIDE 2020)
6. Multiplicity of Aid (Contd.)
Donors’ activities in Pakistan via government and private channels (2015)
18
19. FJK (PIDE 2020)
6. Multiplicity of Aid (Contd.)
Donors’ visits to Pakistan in 2015
487 donor missions to
Pakistan resulting in TWO
donor missions each
working day on average!
19
21. FJK (PIDE 2020)
Future of Foreign Aid to Pakistan
Indigenous policy frameworks… instead of blindly
follow donors’ advice on development strategies!
Public sector needs to work on its Human Resource
Management and improve public sector capacity!
Improve coordination practices:
Revisit engagement strategy
Revival of the Pakistan Development Forum
Provision of specialised platforms
Information Technology for Aid Effectiveness (DAD Pak)
21