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An Analysis of Budget Deficits, Debt Accumulation, and Debt Instability

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  • Faiz Bilquees

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

In Pakistan all the macro indicators have been adversely affected by the persistently high deficits and the strategy adopted to finance them in the last two decades. The excessive domestic borrowing at high rates to finance deficits without any attempts at domestic resource mobilisation and controlling of the deficits over extended periods absorbed all available domestic and external resources. The resulting debttrap led to increased external borrowings at high rates with short-term maturity. This, coupled with massive exchange rate depreciation throughout the last two decades, resulted in rapid debt accumulation. The recent fiscal space created in the wake of events of 9/11, resulting in high reserves, follows considerable debt relief and availability of massive funds on very soft terms. However, the decline in budget deficit continues to occur at the expense of development expenditure, along with some increase in tax revenues. This trend in expenditure needs to be reversed if serious progress in debt reduction is the aim.

Suggested Citation

  • Faiz Bilquees, 2003. "An Analysis of Budget Deficits, Debt Accumulation, and Debt Instability," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(3), pages 177-195.
  • Handle: RePEc:pid:journl:v:42:y:2003:i:3:p:177-195
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    File URL: http://www.pide.org.pk/pdf/PDR/2003/Volume3/177-195.pdf
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    Cited by:

    1. Frederick Nsambu Kijjambu & Benjamin Musiita & Asaph Kaburura Katarangi & Geoffrey Kahangane & Sheilla Akampwera, 2023. "Determinants of Uganda’s Debt Sustainability: The Public Debt Dynamics Model in Perspective," Journal of Economics and Behavioral Studies, AMH International, vol. 15(4), pages 106-124.
    2. Beenash Malik & M. Ali Kemal, 2018. "Measuring the Sufficient Debt Sustainability Condition in Pakistan," PIDE-Working Papers 2018:156, Pakistan Institute of Development Economics.
    3. Blessy Augustine & Lakshmi Kumar, 2020. "Original Sin, Currency Depreciation and External Debt Burden: Evidence from India," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 58-68.
    4. Mohammad Afzal, 2007. "MACROECONOMIC ADJUSTMENT IN PAKISTAN [1981-2004]: An EVALUATION," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(1).
    5. Tahira Sadaf & Touseef Anwer & Muhammad Amjed Iqbal & Ayesha Rouf & Ifza Younas & Zahid Iqbal, 2023. "External Debt and Economic Growth: A Case Study of Pakistan (1972-2021)," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 197-201.
    6. Muhammad Zahir Faridi & Rashid Ahmad & Altaf Hussain & Ahmad Usama, 2022. "Budget Deficit: A Dilemma of Pakistan’s Economy," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 4(1), pages 117-126, March.

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