Foreign Direct Investment and Economic Growth in Pakistan

Abstract

After World War II newly emerged nations inspired by industrialized countries of western world embarked upon economic development projects. Poverty ridden peoples of these countries had suffered at the hands of developed nations and they were anxious about adopting measures which could help alleviate poverty and bring socio-economic wellbeing. This urge compelled them to borrow from industrially advanced countries to gear up their development programs. Borrowing and then repaying with interest put them in a dangerous whirlpool of debt trap. Because with meager income they could not save to pay off their debts, therefore, outstanding amounts went on multiplying and many countries were afraid to be listed as defaulters. They were constrained to find out an alternate source of finances which could provide sufficient funds for initiating and completing development schemes. Thus, foreign direct investment was the only source which could help in not only implementing their planned development projects but also encouraged to undertake additional schemes of development and increase their gross domestic product growth rate. This paper discusses the circumstances which led to rely on foreign direct investment instead of borrowing from external sources. It also throws light on importance of foreign direct investment amidst other sources of financing.