The following paper looks at whether or not foreign aid helps or hinders development prospects in the Global South. The cases of Pakistan and Malawi are instructive inasmuch as both countries continue to languish despite receiving large sums of money from outside donors such as the World Bank and IMF. A review of the evidence indicates that both countries lag developmentally – especially Malawi – and this appears rooted to the fact that the aid either does not get to the people who need it most or, most often, is so contingency-laden that the countries cannot chart their own developmental path; in effect, they are forced to embrace neo-liberal policies or policies formulated in another place and context. In the end, maybe there needs to be a serious redrawing of the terms of these loans so that countries can pursue the model that suits them best in their peculiar circumstances. The theoretical and historical context of this paper is vitally important. To commence, we live in a world characterized by a firm belief that contingent loans are an effective foreign policy tool for the west; The World Bank, for instance, has long advocated the strategic use of funds to help developing parts of the world achieve greater prosperity and a greater “westernization” of their institutions. Evidently, the World Bank – and the IRBD and IDA - views loans and grants and other forms of aid as a means of both enriching these impoverished lands as well as a means of nudging them along a different political trajectory. Thus, in the modern age, development money and the exchange of expertise is done with the aim of helping these countries see the wisdom in becoming more like the west. Theoretically, one might argue that neo-liberalism triumphs in this day and age and there is, to that extent, a firm conviction that free trade and the removal of trade barriers – and of statism in the economic realm – is the best means by which impoverished lands can become more affluent, just like the west. When looked at historically and regionally, the context of nations like Pakistan and Malawi clearly indicate that each land faces serious challenges to successful growth. For one thing, Pakistan is mired in a part of the world where instability and unrest are rampant: Afghanistan and all its ills are just across the border; also, there is the unhappy relationship with powerful India; and there is powerful sectarianism and tribal animosities within the breast of India that threaten to tear the country apart. Pakistan is a lower-income, developing nation that is battling powerful forces within and is being buffeted from without by further powerful forces. In that sense, foreign aid might be said to aid the country, but the tempestuous history of Pakistan suggests that such aid can just as easily fall into the wrong hands and be misused. In addition, large sums of aid and conditions have actually resulted in corruption, poor governance of the nation, dependency and poverty in that country. Eventually, foreign aid can be considered as “phantom aid”, aid which usually does not get to it targeted recipients. In reality, it can be said that aid has been a source of retrogression for this nation. Foreign aid has made this nation somehow truly dependent on donor nations and institutions that according to the State Bank of Pakistan, the total external debt and liabilities of Pakistan are over $60 billion now.
However, if donor countries encourage nation such as Pakistan to invest in private and public sectors rather than government spending the money in its interests and with no investment in the nation, surely would then this nation be able to grip the rope to growth. AccordiCertainly, the situation involving US aid is well-documented; however, what is generally under-reported is that the IMF has been able to