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A Simulation Analysis of the Debt Problem in Pakistan

Author

Listed:
  • Eatzaz Ahmad

    (Quaid-i-Azam University, Islamabad, and Pakistan Institute of Development Economics, Islamabad.)

  • Ayaz Ahmed

    (Quaid-i-Azam University, Islamabad, and Pakistan Institute of Development Economics, Islamabad.)

Abstract

The current debt situation in Pakistan and the resulting financial crisis require serious attempts to find a sustainable indigenous solution. As such it is essential to search ways and means to reduce dependence on external borrowing over medium to long run.1 External debt is usually created to sustain a growth rate of the economy, which is otherwise not feasible with the given state of domestic resources, technology, consumption propensity and economic management practices. However, the success of economic growth financed by external borrowing depends on two factors, namely the domestic saving rate and productivity. A country with lower saving rate needs to borrow more to finance a given rate of economic growth. In Pakistan the flow of external loans is likely to have adversely affected the compulsion for savings. For example, no serious attempts have been made to improve tax collection or to control non-development government expenditure unless forced by the donor agencies.

Suggested Citation

  • Eatzaz Ahmad & Ayaz Ahmed, 1998. "A Simulation Analysis of the Debt Problem in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 355-376.
    • Handle: RePEc:pid:journl:v:37:y:1998:i:4:p:355-376
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    References listed on IDEAS

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    1. Nadeem A. Burney, 1988. "Determinants of Debt Problem in Pakistan and its Debt-servicing Capacity," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(4), pages 805-818.
    2. M. Aslam Chaudhary, 1988. "International Debt and Foreign Dependency:Policy Options for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(4), pages 829-836.
    3. M. Anisur Rahman, 1967. "The Pakistan Perspective Plan and the Objective of Elimination of Dependence on Foreign Assistance," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 7(3), pages 412-415.
    4. Cohen, Daniel, 1988. "The Management of the Developing Countries' Debt: Guidelines and Applications to Brazil," The World Bank Economic Review, World Bank, vol. 2(1), pages 77-103, January.
    5. Eatzaz Ahmad, 1996. "Capital Inflows and National Debt," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 35(4), pages 943-960.
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    Cited by:

    1. Tilat Anwar, 2002. "Unsustainable Debt Burden and Poverty in Pakistan: A Case for Enhanced HIPC Initiative," WIDER Working Paper Series DP2002-53, World Institute for Development Economic Research (UNU-WIDER).
    2. Eatzaz Ahmad, 2011. "A Qualitative Analysis of Pakistan’s External and Internal Debt," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 123-157, September.

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