THE BOMB OF FOREIGN DEBT: Is There Any Way To Escape? A Case Study of Pakistan

Muhammad Aslam Chaudhary and Sh. Shahbaz Ali*

Pakistan Journal of Applied Economics, 1996, vol. 12, issue 1, 67-84

Abstract: It is generally felt that foreign resources (debt) has not played its role in development, rather it has become a burden for the economy. Pakistan's foreign debt has grown over at I I per cent per annum, compared with recent economic growth of less than 4 per cent. In this paper an attempt is made to model foreign debt and make predictions forit till the year20 I O. The model indicates that, although, foreign debt burden is not very severe now. it will become unsustainable in the future. The entire growth of the economy could be wiped out by debt services. if it is not properly managed. Alternative policy options are proposed to solve the debt crisis even before it emerges.

Date: 1996
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