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Foreign Debt, Dependency, and Economic Growth in South Asia


  • Muhammad Aslam Chaudhary

    (Quaid-i-Azam University, Islamabad.)

  • Sabahat Anwar

    (Quaid-i-Azam University, Islamabad.)


Many developing countries are following a policy to attract foreign capital through loans and other means to enhance investment. The inflow of these resources is seen as an addition to investment for accelerating economic growth. However, there are only a few success stories where such resources have made any significant contribution to improve the economic conditions of recipient country. Pakistan and other South Asian countries have received significant amount of foreign loans2 but its role is critical [Chaudhary and Ali (1993, 1996)]. In spite of increasing foreign aid, South Asia has emerged one of the poorest and illiterate regions of the world, having more than 500 million poor living below poverty line and about 46 percent of the world’s illiterate live in the South Asia [UNDP/MHHDC*(1997)]. This is the region, which has 22 percent of the world’s population, while having only 3 percent of the world’s income. It also appears one of the most indebted regions of the world [Anwar (1995)]. In spite of a significant inflow of foreign aid, the economic conditions remained poor in this region. Such a situation calls for an in depth analysis of the contribution of foreign aid. Therefore, this paper is focused to analyse the role and implications of international debt in South Asia. Besides, South Asia’s dependency upon foreign debt is also analysed. In addition, tendency of resources outflow from South Asia to other countries, in terms of debt services, is also identified.

Suggested Citation

  • Muhammad Aslam Chaudhary & Sabahat Anwar, 2000. "Foreign Debt, Dependency, and Economic Growth in South Asia," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 551-570.
  • Handle: RePEc:pid:journl:v:39:y:2000:i:4:p:551-570

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    References listed on IDEAS

    1. Weisskopf, Thomas E., 1972. "The impact of foreign capital inflow on domestic savings in underdeveloped countries," Journal of International Economics, Elsevier, vol. 2(1), pages 25-38, February.
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    Cited by:

    1. Sabina Khurram Jafri, 2008. "External Debt Sustainability Analysis for Pakistan: Outlook for the Medium Term," SBP Working Paper Series 27, State Bank of Pakistan, Research Department.
    2. Ihtsham Padda, 2014. "On minimizing the welfare cost of fiscal policy: evidence from South Asia," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1553-1572, May.
    3. Syed Ammad & Sabihuddin Butt & Shaista Alam, 2012. "Fiscal Responsiveness, Persistence and Discretion: A Case Study of Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 227-244, September.
    4. Younis, Fizza, 2015. "Institutional Quality, Foreign Aid and Economic Performance," MPRA Paper 74147, University Library of Munich, Germany.

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