In this study, the impact of uncertain foreign aids on recipient countries was investigated under a very different prism of fiscal behavior of Pakistan government. By using two stage least squares method, the research analyses the relationship dominated between variation of foreign aid and total expenditure, investment expenditure and tax revenue of Pakistan Government during the period of 1980 – 2015. The foreign aid is categorized into foreign grant and foreign loan which had diversified influences on fiscal behavior through different mechanisms. The empirical results reveal that an uncertainty in foreign loans has negative impacts on government’s investment expenditure, while uncertainty in foreign grants favors the investment budget. However, uncertain foreign grants have an adverse impact on nondevelopment expenditure which is not suffered by the uncertainty of foreign loans. In case of government tax revenue, neither foreign grants nor foreign loans have statistically insignificant impact. Finally, this research would like to suggest the Pakistan government to adjust their policies in order to lessen their dependence on foreign aids and to reduce impacts of the external financing sources on fiscal behavior of domestic government. Supervisor:- Dr. Attiya Yasmin Javid