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Choice Between Domestic and Foreign Debt: A Case Study of Pakistan

Received: 28 July 2017     Accepted: 8 August 2017     Published: 15 November 2017
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Abstract

In Pakistan, domestic debt, foreign debt and debt servicing is the most discussed issue among the economists and policy makers. Pakistan has been taking a substantial amount of money in the form of domestic and foreign debt since 1970’s. Most common reason of debt dependency is saving-investment gap and revenue–expenditure gap. To fill these gaps, debts has become a common source. High level of debt servicing left no room for policy makers to carry out macroeconomic reforms in order to increase GDP growth rate. The present study has been conducted to investigate the choice between domestic and foreign debt in promoting economic growth. Auto regressive Distributed Lag (ARDL) approach has been used in the study for the data set from 1972-2010. It is found that both foreign and domestic debt servicing have negatively influenced the economic growth. In the light of the findings of this study, it is suggested that Pakistan should not rely on both external and internal debts to fulfill its gaps. Policy makers should use the policy of maximum revenue generation through domestic resource utilization, divert public expenditure from consumption to investment, promote tax culture and investment in human capital is much needed to reduce dependence on debts.

Published in International Journal of Economics, Finance and Management Sciences (Volume 5, Issue 6)
DOI 10.11648/j.ijefm.20170506.12
Page(s) 284-293
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Domestic Debt, Foreign Debt, Debt Servicing, Real GDP, ARDL

References
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Cite This Article
  • APA Style

    Ghazala Zafar Lashari, Muhammad Akbar, Ruhma Khan. (2017). Choice Between Domestic and Foreign Debt: A Case Study of Pakistan. International Journal of Economics, Finance and Management Sciences, 5(6), 284-293. https://doi.org/10.11648/j.ijefm.20170506.12

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    ACS Style

    Ghazala Zafar Lashari; Muhammad Akbar; Ruhma Khan. Choice Between Domestic and Foreign Debt: A Case Study of Pakistan. Int. J. Econ. Finance Manag. Sci. 2017, 5(6), 284-293. doi: 10.11648/j.ijefm.20170506.12

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    AMA Style

    Ghazala Zafar Lashari, Muhammad Akbar, Ruhma Khan. Choice Between Domestic and Foreign Debt: A Case Study of Pakistan. Int J Econ Finance Manag Sci. 2017;5(6):284-293. doi: 10.11648/j.ijefm.20170506.12

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  • @article{10.11648/j.ijefm.20170506.12,
      author = {Ghazala Zafar Lashari and Muhammad Akbar and Ruhma Khan},
      title = {Choice Between Domestic and Foreign Debt: A Case Study of Pakistan},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {5},
      number = {6},
      pages = {284-293},
      doi = {10.11648/j.ijefm.20170506.12},
      url = {https://doi.org/10.11648/j.ijefm.20170506.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20170506.12},
      abstract = {In Pakistan, domestic debt, foreign debt and debt servicing is the most discussed issue among the economists and policy makers. Pakistan has been taking a substantial amount of money in the form of domestic and foreign debt since 1970’s. Most common reason of debt dependency is saving-investment gap and revenue–expenditure gap. To fill these gaps, debts has become a common source. High level of debt servicing left no room for policy makers to carry out macroeconomic reforms in order to increase GDP growth rate. The present study has been conducted to investigate the choice between domestic and foreign debt in promoting economic growth. Auto regressive Distributed Lag (ARDL) approach has been used in the study for the data set from 1972-2010. It is found that both foreign and domestic debt servicing have negatively influenced the economic growth. In the light of the findings of this study, it is suggested that Pakistan should not rely on both external and internal debts to fulfill its gaps. Policy makers should use the policy of maximum revenue generation through domestic resource utilization, divert public expenditure from consumption to investment, promote tax culture and investment in human capital is much needed to reduce dependence on debts.},
     year = {2017}
    }
    

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    T1  - Choice Between Domestic and Foreign Debt: A Case Study of Pakistan
    AU  - Ghazala Zafar Lashari
    AU  - Muhammad Akbar
    AU  - Ruhma Khan
    Y1  - 2017/11/15
    PY  - 2017
    N1  - https://doi.org/10.11648/j.ijefm.20170506.12
    DO  - 10.11648/j.ijefm.20170506.12
    T2  - International Journal of Economics, Finance and Management Sciences
    JF  - International Journal of Economics, Finance and Management Sciences
    JO  - International Journal of Economics, Finance and Management Sciences
    SP  - 284
    EP  - 293
    PB  - Science Publishing Group
    SN  - 2326-9561
    UR  - https://doi.org/10.11648/j.ijefm.20170506.12
    AB  - In Pakistan, domestic debt, foreign debt and debt servicing is the most discussed issue among the economists and policy makers. Pakistan has been taking a substantial amount of money in the form of domestic and foreign debt since 1970’s. Most common reason of debt dependency is saving-investment gap and revenue–expenditure gap. To fill these gaps, debts has become a common source. High level of debt servicing left no room for policy makers to carry out macroeconomic reforms in order to increase GDP growth rate. The present study has been conducted to investigate the choice between domestic and foreign debt in promoting economic growth. Auto regressive Distributed Lag (ARDL) approach has been used in the study for the data set from 1972-2010. It is found that both foreign and domestic debt servicing have negatively influenced the economic growth. In the light of the findings of this study, it is suggested that Pakistan should not rely on both external and internal debts to fulfill its gaps. Policy makers should use the policy of maximum revenue generation through domestic resource utilization, divert public expenditure from consumption to investment, promote tax culture and investment in human capital is much needed to reduce dependence on debts.
    VL  - 5
    IS  - 6
    ER  - 

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Author Information
  • Department of Economics, Women University of Azad Jammu and Kashmir Bagh, Bagh, Pakistan

  • Department of Economics, Bahauddin Zakariya University, Multan, Pakistan

  • Institute of Management Sciences, Bahauddin Zakariya University, Multan, Pakistan

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