Pakistan has historically received large volumes of aid but it has also faced an increasingly difficult task of aid coordination. In 2007, Pakistan received more than U.S.$2.2 billion in Official Development Assistance (ODA), ranking the country as the sixth largest recipient of official aid in the world. This overall sum, however, came from diverse sources in an erratic fashion and was being spent on many different activities, often through a combination of budgetary and non-budgetary arrangements, thus leading to a complex task of coordination. This study investigates these various aspects of aid composition, fragmentation, and volatility as key measures of aid quality and discusses their implication for the coordination and effectiveness of aid.
In this study, the composition of aid—aid mix—refers to the patterns of aid disbursement through different channels (e.g. food assistance, technical assistance) and modalities (e.g. grants, development loans). The aid mix is an important determinant of aid effectiveness because some forms of aid, such as food aid and technical assistance, are generally considered to be less effective than others. Such non-monetized forms also reduce the amount that is actually available to the recipient country to spend on projects and programs.
The fragmentation of aid explores the extent to which aid received by a country is atomized among many different donors and is spent on various projects across different sectors, thus leading to the proliferation of many small-sized donor assisted activities on the ground. High fragmentation of aid generally implies higher transaction costs, coordination failures, and loss of efficiency for both donors and aid recipients. Similarly, aid volatility—the extent to which aid flows are steady, hence more predictable—affects the ability of the recipients to bring quality and long-term orientation in their planning and spending practices.
These three aspects of aid quality—the composition of aid, its fragmentation and volatility—are explored in the following section. The assessment of aid quality is followed by a presentation of selected case studies that highlight current and past efforts of different aid players in Pakistan to manage the issues emanating from disjointed and unstable aid on the ground. The penultimate section presents a brief overview of overall coordination structures and efforts at the country level. The conclusion summarizes key insights that emerge from the study.