Foreign aid dependence
Topic: Comparative Development: India, China and Pakistan · NCERT: Class 11, Ch 8 "Comparative Development Experiences of India and its Neighbours"
Meaning
Foreign aid dependence means a country relies on foreign grants and loans to pay for its investment and imports, instead of earning enough itself through exports. This is risky because loans must be repaid. When the country cannot earn enough foreign exchange (foreign currency such as dollars), repayment becomes harder and it has to keep borrowing. NCERT gives this as one reason for Pakistan's economic slowdown.
Example
Pakistan used foreign grants and loans to fund its investment and imports, and found them increasingly hard to repay. It has had more than 20 IMF arrangements. They include a US$3 bn Stand-By Arrangement in 2023 and a US$7 bn Extended Fund Facility over 37 months, agreed in September 2024.
Don't confuse with
- Remittance dependence: Remittances are money sent home by workers abroad, such as Pakistanis in the Middle East. They do not have to be repaid. Aid loans carry repayment obligations.