Growing External Debt in Pakistan and its Implication for Poverty

Authors

  • Asif Farid

Keywords:

external debt, poverty, inequality.

Abstract

This study investigates the effectiveness of external debt in determining socio-
economic economic development in Pakistan during the period from 1973 to 2013 using time series data. For analysis, Ordinary Least Square (OLS) and Augmented EngelGranger (AEG) test is used. The results from AEG test show that there is co-integration and long run bond between external debt and poverty. The results provide strong evidences that poor economic performance have signiï¬cantly aggravated economic downturn and augmented poverty level. Growing external debt services have unfavorable impacts on poverty level and income inequality as less has been left to ï¬nance expenditures on social services and poverty reduction. Poverty level and income inequality can be useful indicators of the Pakistan's initiatives on debt reduction goals and debt relief.

References

Alesina, A. (2000), “Who gives foreign aid to whom and why� Journal of Economic Growth, 5 (1), 33-63.

Anwar T (2002),“Unsustainable debt burden and poverty in Pakistanâ€. A case for enhanced hipc initiative.Discussion Paper No. 2002/53.Pakistan Institute of Development Economics, Islamabad.

Agnello, L and R. M. Sousa (2009), “The determinants of public deï¬cit

volatilityâ€.European Central Bank, Working Paper Series, No 1042.

Ahmad, E., & Ahmed, A. (1998),“A simulation analysis of debt problem in

Pakistanâ€.Pakistan Development Review, 37(4), 355–376.

Burnside, C. A., and Dollar, D. (2000),“Aid, Policies and Growthâ€. American Economic Review, 90: 847-868.

Brautigam, D. A., and Knack, S. (2004), “Foreign aid, institutions and governance in Sub-Saharan Africaâ€.Economic Development and Cultural Change, 52: 255285.

Boone, P. (1995), “Politics and the Effectiveness of Foreign Aidâ€.European Economic Review 40, 289–329.

Bilquees, F. (2003), “Analysis of budget deï¬cits, debt accumulation, and debt instabilityâ€.The Pakistan Development Review, Volume 42, No. 3 (Autumn), pp. 177-195.

Birdsall, N., John W. and Brian Deese (2002),“Delivering on Debt Relief: From IMF Gold to a New Aid Architectureâ€.Washington, DC Center for Global Development and the Institute for International Economics

Carl-Johan Dalgaard, H. H. (2004), “On the Empirics of Foreign Aid and Growthâ€.The Economic Journal, Royal Economic Society 114.

Cline, W. (2003), “HIPC Debt Sustainability and Post-relief Lending Policyâ€, (unpublished; Center for Global Development and Institute for International Economics).

Collier, P. and D. Dollar (2002), “Aid Allocation and Poverty Reductionâ€.European Economic Review 46:8, 1475–1500.

Crouch, R. L. (1973), “Economic Development, Foreign Aid, and Neo-classical Growthâ€.Journal of Development Studies 9: 353–364.

Cuddington, John T., (1997), “Analyzing the Sustainability of Fiscal Deï¬cits in Developing Countriesâ€, Working PaperNo. 97-01, Georgetown University, Economic Department.

Chishti.S, and M. AynulHasan (1992), “Foreign Aid, Defense Expenditure and Public Investment in Pakistanâ€.The Pakistan Development Review 31, 895–902.

Easterly, W. (2003), “Can foreign aid buy growthâ€.Journal of Economic Perspectives, 17: 23-48.

Eurodad, (2001), “Putting Poverty Reduction Firstâ€. (Brussels).

Farid, Rehman, Farid Feeny, S., and M. McGillivray (2010) Aid and Public Sector Fiscal Behaviour in Failing

States.Economic Modelling27:5, 1006–1016.

GOP.Economic Survey, various issues, Finance Division, Islamabad.

Gray, S. (1998), “Debt Sustainability and Developing Economiesâ€. Available via Internet.

Granger, C.W. and P. Newbold, (1974), “Spurious Regression in Econometricsâ€.Journal of Econometrics.

Griffin, K. (1970), “Foreign Capital, Domestic Savings and Economic

Developmentâ€.Bulletin of the Oxford University Institute of Economics and

Statistics 32:2, 99–112.

Hasan, P. (1998), “Pakistan's Economy at the Crossroads: Past Policies and Present Imperativesâ€. Oxford University Press, Karachi:

Downloads

Published

2019-10-16