This document summarizes a presentation on the complexities and constraints of foreign aid to Pakistan. It discusses: 1) The massive aid industry involving hundreds of donors, organizations, and billions of dollars, making the aid landscape complex. 2) The multi-level aid policy process in Pakistan involving numerous government agencies and steps to manage aid projects and programs. 3) The constraints Pakistan faces in utilizing aid effectively, including shortages of technical capacity in the public sector and difficulties coordinating the many aid activities.

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.
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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
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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.
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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)
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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)*
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7. FJK (PIDE 2020)
2. Aid Delivery System
Source: OECD DAC (2006) 7

8. FJK (PIDE 2020)
2. Aid Delivery System (Linear Chain)
Taxpayers Donor Govt
Recipient
Govt
Contractor Beneficiaries
INGOs
NGOs/CSOs
Multilateral donors/IFIs
Bilateral agency/mission
Private Foundations/IRDF
UN System
Charities
Speaker’s own illustration
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9. FJK (PIDE 2020)
Aid Policy Network in Pakistan
Source: Khan, F.J. (2020)*
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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
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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
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12. FJK (PIDE 2020)
3. Aid Policy Process (Contd.)
Source: Khan, F.J. (2015)
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13. FJK (PIDE 2020)
4. Public Policy & Economic Growth
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14. FJK (PIDE 2020)
4. Public Policy & Economic Growth
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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
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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)
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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
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18. FJK (PIDE 2020)
6. Multiplicity of Aid (Contd.)
Donors’ activities in Pakistan via government and private channels (2015)
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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!
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20. FJK (PIDE 2020)
Thank You!
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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)
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22. FJK (PIDE 2020)
Multiplicity of Aid: Transaction Costs
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23. FJK (PIDE 2020)
Technical capacity shortage in the public
sector (Pakistan)
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24. FJK (PIDE 2020)
Institutional capacity shortage in the public
sector (Pakistan)
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25. FJK (PIDE 2020)
Debt Servicing!
Year Debt
Service/
Revenue
Interest
Service/
Revenue
Debt
Service/
GDP
External
Debt
Servicing
US$ M
External
Debt
Servicing as
% of Exports
External
Debt
Servicing as
% of Foreign
Exchange
Earnings
External
Debt
Servicing as
% of GDP
2010 40.4 30.9 5.6 3,095 15.7 8.1 1.7
2011 41.0 31.0 4.7 2,687 10.6 5.6 1.3
2012 40.0 31.2 5.1 2,251 9.1 4.7 1.0
2013 40.5 33.3 5.4 2,612 20.6 12.9 1.1
2014 40.1 31.6 5.8 2,810 23.0 13.7 1.1
2015 40.4 33.2 5.8 3,211 18.0 10.2 1.2
2016 35.9 28.4 5.5 4,294 20.7 10.4 1.5
2017 38.3 27.3 5.9 6,437 29.6 15.7 2.1
2018 37.3 28.7 5.6 5,977 25.0 13.7 2.0
2019 47.1 34.2 5.4 9,476 39.1 21.0 3.225