Events Influencing the External Debts of Pakistan

Abstract

This study was conducted to evaluate the trend in external debts, and events influencing the increase or decrease in external debts of Pakistan. Obviously external debt is risky for economic development in both developed and developing countries but the developing countries are more prone to suffer as compared with developed countries. Developing countries are facing the problems of capital scarcity, low saving, traditional technology, poor education and lack of resources for economic development. The problem of public debt in Pakistan is very grave and is almost of similar nature. Although Pakistan’s external debt has increased because of misuse of loans, and many developmental projects remained uncompleted due to political instability and frequent changes in governments policies because each new government plan their new projects and new policies further over burden the economy. Pakistan’s population increases very rapidly and therefore demand increases. Pakistan is not self-sufficient in food stuffs and even imports wheat from abroad. Strong defense is imperative for a country but spending of huge amount on defense increases external debt further. The economic status of Pakistan is very unsafe with unsustainable external debt. Pakistan has been unsuccessful in controlling a balance between expenditure and revenue. High and rising external debt burden constitutes a serious constraint for development; a major barrier to macroeconomic stability and hence, to growth and poverty reduction; a discouragement to foreign investment because it creates a high risk environment and exchange rate depreciation; and a discouragement for government to carry out structural reforms in the various sectors of the economy.

Keywords: External Debt, Event study, Regimes, Pakistan