Investigating the Role of External Trade and External Debt on the Economic Growth of Pakistan

Athar Iqbal, Yaseen Raza Turabi, Dr. Javed Hussain, Attaullah Laghari

Abstract


Purpose: This paper is designed to investigate the effect of External Debt on the economic growth of Pakistan. The study examines effects of Economic indicators such as External Debt, Debt Servicing, Export and Import on the economic growth in Pakistan. 

Methodology/Sampling: The results of the study are based on OLS estimates. The data for External debt, Debt servicing, Exports, Import and Real GDP growth has been taken for 41 years (1972 to 2013) from the Handbook of Statistics on Pakistan Economy 2010 and missing values have been collected from the library of State Bank of Pakistan.

Findings: The study concludes that External Debt has significant positive effect, whereas the Debt Servicing has Negative effect on the Economic Growth. The strong Debt Management is recommended to achieve the economic growth oriented objective via External Debt. The study also suggests that there is significant positive effect of export on the economic growth of Pakistan. The study could not find any significant effect of Import on the economic growth.

Practical Implications: This study provides empirical evidences for the significance of external trade for the economic growth, because it can boast the economic growth, whereas, the external debt could not be suggested because the debt servicing has negative effect on the economic growth.

Keywords. External Debt, Debt Servicing, Import, Economic Growth.


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