The Effect of External Debt in the Economic Growth of Pakistan

Abstract

This study evaluates the impact of external (or foreign) debt on the economy of Pakistan. For the purpose of this research, 12-years macroeconomic data was obtained from credible publications of State Bank of Pakistan and statistics reported in World Bank database. In order precisely and accurately measure the impact for the given period, this research first presented an extensive review of historic trend of Pakistan’s GDP and external debt relation over the vast period between 1950s to 2005.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.

Keywords: External Debt, Economic Growth, Trend of Pakistan’s GDP

DOI: 10.7176/PPAR/9-3-06

Publication date:March 31^st 2019