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CSS Economics of Pakistan P-II QUESTION #1716
Question 1
The academic and policy literature on foreign aid to Pakistan has identified a recurring cluster of structural dysfunctions. Which composite characterisation most accurately captures the documented criticisms?
  • Aid dependency reduces incentives for domestic revenue mobilisation and structural economic reforms
  • Aid flows are partly captured through rent-seeking, inflating corruption and weakening institutional accountability
  • A disproportionate share of aid is channelled into militarily or politically strategic sectors rather than productive investment
  • All of these✔️
Correct Answer Explanation
Empirical research on aid effectiveness in Pakistan — including studies by the World Bank, ODI, and Pakistani think tanks — consistently identifies: (1) aid-induced fiscal complacency (Dutch disease effects reducing tax effort); (2) leakage through corruption and elite capture; and (3) strategic aid allocation by donors (especially US security-related aid) that bypasses productive sectors. The 2009 Friends of Democratic Pakistan conference and subsequent disbursements illustrated all three dysfunctions simultaneously.