Abstract

Education sector is undergoing through a crises situation in most of developing countries including Pakistan. In the recent years, there has been a huge increase in the amount of foreign aid given by developed countries and other international financial institutions to education sector of Pakistan to achieve the United Nations Millennium Development Goals (MDGs). In spite of this huge inflow of foreign resources, major educational outcomes have always been low in the country. The objective of this study is to empirically examine the effect of foreign aid on the education sector of Pakistan using time series data for the period 1991-2007. The results show that both foreign aid given to education sector of Pakistan and total aid disbursement have significant positive relationship with literacy rate of the country. While the variable of political governance is found to be more significantly related with literacy rate than economic governance.