The Impact of Public Debt on Economic Growth of Pakistan

The Pakistan Development Review

The accumulation of external debt is common phenomenon of the developing countries and it has become a common feature of the fiscal sectors of most of the economies. A country with lower saving rate needs to borrow more to finance the given rate of economic growth. So external debt is obtained to sustain the growth rate of the economy, which is otherwise not feasible with the given domestic resources. Pakistan is one of the developing countries and faces serious debt problems, according to World Bank Report 2000-2001, Pakistan is among the Highly Indebted Countries (HICs); because Pakistan’s present and future debt situation is very grim. According to the World Bank total external debt may be defined as debt owed to non-resident repayable in terms of foreign currency, goods or services. External debt is the composition of long term debt (public and publicly guaranteed debt plus private non guaranteed debt), short term commercial debt and International Monetary Fund (IMF) loans. Prio...

Evropejskij Issledovatelʹ, 2014

Since 1980s, the mounting debts and debt payment service of Pakistan due focus and consideration from the Policy makers and economists. This study was additionally done to audit and investigate the effect of external debt overhauling on the development and growth of Pakistan's economy. To hunt the target of research, five variables i.e. Growth, external debt servicing, saving, net export, Foreign Direct Investment were taken to focus their fact association with the GDP or development of the Pakistan's economy. Annual panel data was taken from the source World Bank indicator from the period of 1980 to 2013 and was manipulated through least square multiple regression models. The main variable external debt has significantly negative impact on dependent variable GDP so it‟s concluded that Pakistan should go for the option of debt forgiveness and must invite FDI but not much as their overloading may hurt the economy. Adjusting saving (ADS) highly significant positive relation wi...

Foreign Aid or External Debt is considered a major source of income for any developing countries. Pakistan has depend on much on foreign debt to sponsor its balance of payments shortfall and saving outlay gap. This heavily depend on external incomes, although these resources were uncontrollable since past years but now the water has rises upto the head and it is a alarming situation for a country to take necessary precautions for it. The primiary objective of this paper is to discover the relationship between external debt and economic growth of Pakistan for the period of 2007-2015, using time series econometric technique. We took a point of look on external debt and economic performance of Pakistan. The paper reflects that External debt is destructively related with economic growth. The research make a researcher upto that conclusion that if external will increase the economic growth of a country will be in recession. Same as that debt servicing has also a important and adverse influence on GDP growth. If a debt service lean towards increase than there will be less chance for economic growth.

IMF Working Papers, 2004

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper investigates the channels through which debt affects growth, specifically whether debt affects growth through factor accumulation or total factor productivity growth. It also tests for the presence of nonlinearities in the effects of debt on the different sources of growth. We use a large panel dataset of 61 developing countries over the period 1969-98. Results indicate that the negative impact of high debt on growth operates both through a strong negative effect on physical capital accumulation and on total factor productivity growth. On average, for high-debt countries, doubling debt will reduce output growth by about 1 percentage point and reduce both per capita physical capital and total factor productivity growth by somewhat less than that. In terms of the contributions to growth, approximately one-third of the effect of debt on growth occurs via physical capital accumulation and two-thirds via total factor productivity growth. The results are generally robust to the use of alternative estimators to control (to different extents) for biases associated with unobserved country-specific effects and the endogeneity of several regressors, particularly the debt variables. In particular, the results are shown to be compatible with a simultaneous significant effect of growth on debt ratios, as suggested by Easterly . JEL Classification Numbers: F21; F34; F43; O10; O40

Foreign Aid or External debt is considered a significant source of income for developing countries. Pakistan has relied much on foreign debt to finance its balance of payments deficit and saving investment gap. This heavily dependence on external resources became uncontrollable in late 1980s. Primary objective of this paper is to explore the relationship between external debt and economic growth in Pakistan for the period of 1972-2005, using time series econometric technique. We took a point of glance of external debt and economic performance of Pakistan. The paper shows that External Debt is negatively and significantly related with economic growth. The evidence suggests that increase in external debt will lead to decline in economic growth. Debt servicing has also significant and negative impact on GDP growth. As the debt servicing tends to increase, there will be less opportunities for economic growth.

2019

This article is an attempt to evaluate the effect of external debt on economic growth for during the period of 1980–2016. The test is used for determining stationarity, whereas the ADF test results exhibit that the variables used found are . The empirical results indicate that external debt and total debt service have deleterious and statistically significant impacts on GDP growth rate. The other explanatory variables namely human capital by life expectancy, exports, and Foreign Direct Investment (FDI)reveals significantly positive significant influence on GDP growth rate. Appropriate policy should be adopted by the policy makers to reduce external debt, increase volume of exports and enhance more foreign investment, it will boost economic growth in the country.

ABC Journal of Advanced Research

In this study we examine the effect of external debt with the economic growth of Pakistan. External debt is a debt which is held by the creditors of foreign countries in the world. Time series data is collected from the World Bank site for the last thirty years ranges from 1986-2015. Statistics analysis and ordinary least square regression is performed through a descriptive statistical table. To check the relationship between economic growth and external debt OLS model is used. GDP is our dependent variable. Gross domestic saving, gross capital formation and external Debt stock is our independent variable. The results show that the huge amount of number of GDP of country is backed by external debt.

2002

2021

Pressacademia, 2015

This study aims to contribute to the understanding of the impact of external debt on economic growth by using the data for moderately indebted middle-income countries over the period of 1985-2013. The paper employs a relatively recent panel analysis technique, the common correlated effects (CCE) framework, which considers cross-sectional dependence and heterogeneity implications in the data. Our overall findings suggest a negative linear effect of external debt for the panel despite some exceptions in the country-specific results. In the panel results, the impact of external indebtedness occurs through the debt stock rather than a direct impact of liquidity constraint represented by a debt service variable. 1.INTRODUCTION During the 1950s and 1960s foreign resources were considered as significant for development and economic growth of less developed economies (e.g. Avromovic et al., 1964; Chenery and Strout, 1966) 1. It was argued that countries at early stages of development did not have sufficient resources that could be devoted to investment, which in turn, was crucial for economic development. External debt was seen as an important source of economic growth for developing economies through its impact on capital accumulation, human resource development and infrastructure improvement. As foreign aid and/or foreign debt were seen almost inevitable, many developing countries exerted external resources at an increasing rate. Most of these countries borrowed to compensate insufficiency of domestic savings and to meet foreign currency need for imports of intermediate and capital goods. As a result, their indebtedness intensified and reached critical levels, eventually resulting in foreign debt crises in a number of economies at the end of the 1970s or in the early 1980s. In the meanwhile, the share of private loans compared to official financing in total foreign indebtedness started 1 Although the Harrod-Domar model was not developed to offer solutions to the issues in the less developed economies, it was used by the economists who debated for the significance of external resources for those.