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Indebtedness and Poverty: The Case of Pakistan

Author

Listed:
  • Javeria Naeem

    (Student, Department of Economics, Fatima Jinnah Women University, Rawalpindi)

  • Saadia Sherbaz

    (Lecturer, Department of Economics, Fatima Jinnah Women University, Rawalpindi)

Abstract

Since the advent of Neolibralism, debt has been construed as means of policy reforms to achieve stability, liberalisation and recovery from shocks. However, the other side of the picture has been either ignored or underappreciated. That is the human cost of indebtedness. Whether internal or external, indebtedness may have significant implications for the living conditions of the masses, as it leads to substantial deviation of resources towards debt management. This paper attempts to assess the impact of indebtedness on poverty for Pakistan. The impact of total, internal and external debt on poverty has been evaluated separately. Using the data from 1973 to 2013, Johansen Co-nintegration test reveals long run relationship between debt and poverty. The results remain consistent when domestic and external debt is taken separately. The long run impact of total, internal and external debt on poverty is positive. Which means that for Pakistan debt leads to increase in poverty. Further, it is evident that domestic debt has more severe poverty implications as compared to external debt. These results have two important policy implications; firstly, the overall levels of debt have to be reduced and secondly, the issue of domestic debt reduction takes priority.

Suggested Citation

  • Javeria Naeem & Saadia Sherbaz, 2016. "Indebtedness and Poverty: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 823-835.
    • Handle: RePEc:pid:journl:v:55:y:2016:i:4:p:823-835
    as

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    File URL: http://www.pide.org.pk/pdf/PDR/2016/Volume4/823-835.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Muhammad Shahid & Mahmood Shah & Bibi Aisha Sadiqa, 2019. "Foreign Debt and Debt Servicing Relief Effect Implications in Pakistan: A Poverty Reduction Strategy," Global Economics Review, Humanity Only, vol. 4(4), pages 23-34, December.

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    More about this item

    Keywords

    External Debt; Domestic Debt; Poverty; Johanson Cointegration;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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