This paper reviews the trends of two types of foreign capital inflows, namely foreign aid and foreign private investment, to Pakistan. Like other developing countries, the volume of foreign aid to Pakistan has been decreasing. Meanwhile foreign private investment to Pakistan has increased, though not as sharply as that to other developing Asian countries. The study finds that the impacts of foreign capital, aid and private investment on the economic performance of Pakistan have been insignificant. This paper suggests that these consequences are due to the inadequate development of domestic institutional structure, human capital, and indigenous entrepreneurship.