Essay On External Debt In Pakistan

Because of the low saving rate, low per capita income, and inefficient tax collection system, along with that Pakistan exports raw material and primary goods at low prices and import expensive goods that leads to current account deficit so due to all these factors there is a mismatch between the revenue and expenditure so to bridge the gap a country needs to borrow to finance its economic growth and due to insufficient resources domestically has brought the need for external debt and the dependence on external debt has been increasing over time. External debt plays a very important role in promoting economic growth specially for the developing countries it is helpful if the government utilizes it for capital formulation

But high and rising debt imposes a serious threat to the economic stability it acts a big hurdle to investment and growth and thus to generation of new employment oppurtunities . as the size of external debt increases the growing uncertainity also grows about the policies of government that it will take in order to meet its debt services obligations Also if the external debt is not properly managed it will be discouragement to foreign investment because it creates a high risk environment for doing business in the

Pakistan added around $29 billion in its external debt since 2000, of which $3.761 billion was only included in during 2000-2007 while the other $24.9 billion was added during 2008-2015. In other words, Pakistan further has added almost seven times more debt in the past eight years in comparison with the previous eight years (see, Fig. 1 and Appendix A for