FOREIGN DEBT DYNAMICS AND GROWTH, EVIDENCE FROM PAKISTAN

Abstract

The paper explored the concept of association between the debts and economic growth. The study was conducted to check the relationship between Exports, Pubic Debts, External Debts and GPD of Pakistan. The phenomena have been examined in the economic system of Pakistan by taking data from 1980 to 2017. The data in the paper has been collected WBI (World Bank Indicators), IMF and State Bank of Pakistan. The factors included were time series and used unit root test for the status of non-stationary and stationary. The findings of unit root test confirm that the time series were found non-stationary at level while they have become stationary at first difference. The test of optimal lag selection recommends one single lag for the co-integration approach. The findings of Trace and Max Eigen value test confirm that there is negative and significant relationship between public debt, external debts and economic growth of Pakistan. The study recommends the positive and significant relationship between exports and economic growth of Pakistan. The paper recommends that the proper fiscal policy and appropriate monetary management lead to use the funds in income generation project for increasing future income. The authorities should support local producers and help them out to increase production which will be helpful for the repayment of foreign loans.