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Debt Accumulation and Its Implications for Growth and Poverty


  • A. R. Kemal

    (Pakistan Institute of Development Economics, Islamabad.)


Rising levels of debt and debt servicing, falling rates of investment, declining growth rates of output and employment, and sharp increase in poverty sum up the disappointing performance of Pakistan’s economy over the last decade. By the end of the fiscal year 2001, external debt had increased to $30 billion, and the ratio of external debt and the present value of debt servicing stood at 64.0 and 80.0 percent of GDP respectively. Even though the ratio of debt servicing to export earnings and debt servicing to total foreign exchange earnings have declined because of debt rescheduling, still they were 37.4 and 23.3 percent, respectively, in 2000-01. Prior to debt rescheduling, the two ratios were 55.4 and 34.9 percent in 1997-98. The average growth rate of GDP has been less than 4 percent, with a declining trend, and unemployment rate has increased from less than 5 percent to 7.8 percent over the last decade. The real wages have fallen, and one-third of the population is unable to meet its nutritional requirements. While a number of factors including the inconsistency of the economic policies of successive governments, Structural Adjustment and Stabilisation Programmes of the IMF, and corruption have been responsible for this state of affairs, debt accumulation to alarming proportions is also a major cause of such performance.

Suggested Citation

  • A. R. Kemal, 2001. "Debt Accumulation and Its Implications for Growth and Poverty," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 263-281.
  • Handle: RePEc:pid:journl:v:40:y:2001:i:4:p:263-281

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    References listed on IDEAS

    1. Eaton, Jonathan, 1987. "Public Debt Guarantees and Private Capital Flight," World Bank Economic Review, World Bank Group, vol. 1(3), pages 377-395, May.
    2. Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-327, April.
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    4. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    5. A.R. Kemal, 1994. "Structural Adjustment, Employment, Income Distribution and Poverty," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 901-914.
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    7. Stanley Fischer, 1987. "Resolving the International Debt Crisis," NBER Working Papers 2373, National Bureau of Economic Research, Inc.
    8. Jeffrey Sachs, 1986. "Managing the LDC Debt Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 397-440.
    9. Rehana Siddiqui & Afia Malik, 2001. "Debt and Economic Growth in South Asia," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 677-688.
    10. M. Aslam Chaudhary & Sabahat Anwar, 2001. "Debt Laffer Curve for South Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 705-720.
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    Cited by:

    1. repec:pid:journl:v:55:y:2016:i:4:p:823-835 is not listed on IDEAS
    2. Srinivasa Rao Gangadharan & Lakshmi Padmakumari, 2016. "Impact of domestic public debt on economic growth - An empirical study in the Indian context," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(4), pages 101-116, April.
    3. Taha Zaghdoudi & Abdelaziz Hakimi, 2017. "Does external debt- poverty relationship confirm the debtoverhang hypothesis for developing counties?," Economics Bulletin, AccessEcon, vol. 37(2), pages 653-665.

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