Foreign Aid to Pakistan: Impact on GDP with least square estimation

Foreign direct investment flows have increased dramatically in recent decades. Developing countries have long tried to attract a reasonable amount of FDI, and easing foreign exchanges regimes, and removing restrictions have become increasingly popular. Foreign direct investment (FDI) is a potent weapon of economic development, especially in the current global context. It enables a capital-poor country like Pakistan to build up physical capital, create employment opportunities, develop productive capacity, enhance skills of local labor through transfer of technology and managerial know-how, and help integrate the domestic economy with the global economy There are many forms of foreign resources like Foreign Direct Investment, Grants & Loans, Foreign Portfolio Investment, Export Credit, Official Aid, Technical Assistance, Emergency Relief, Project and non project aid. This paper reviews impact of foreign aid on development. By performing Least Squares we analyse the trend and impact of foreign aid on the economic development of Pakistan during a three decade period. From the analysis it is clear that the foreign aid and inflow has a positive impact on the GDP.