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Indebtedness and Poverty: The Case of Pakistan

Author

Listed:
  • Javeria Naeem

    (Student, Department of Economics, Fatima Jinnah Women University, Rawalpindi)

  • Saadia Sherbaz

    (Lecturer, Department of Economics, Fatima Jinnah Women University, Rawalpindi)

Abstract

Since the advent of Neolibralism, debt has been construed as means of policy reforms to achieve stability, liberalisation and recovery from shocks. However, the other side of the picture has been either ignored or underappreciated. That is the human cost of indebtedness. Whether internal or external, indebtedness may have significant implications for the living conditions of the masses, as it leads to substantial deviation of resources towards debt management. This paper attempts to assess the impact of indebtedness on poverty for Pakistan. The impact of total, internal and external debt on poverty has been evaluated separately. Using the data from 1973 to 2013, Johansen Co-nintegration test reveals long run relationship between debt and poverty. The results remain consistent when domestic and external debt is taken separately. The long run impact of total, internal and external debt on poverty is positive. Which means that for Pakistan debt leads to increase in poverty. Further, it is evident that domestic debt has more severe poverty implications as compared to external debt. These results have two important policy implications; firstly, the overall levels of debt have to be reduced and secondly, the issue of domestic debt reduction takes priority.

Suggested Citation

  • Javeria Naeem & Saadia Sherbaz, 2016. "Indebtedness and Poverty: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 823-835.
    • Handle: RePEc:pid:journl:v:55:y:2016:i:4:p:823-835
    as

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    File URL: http://www.pide.org.pk/pdf/PDR/2016/Volume4/823-835.pdf
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    References listed on IDEAS

    as
    1. Jaejoon Woo & Manmohan S. Kumar, 2015. "Public Debt and Growth," Economica, London School of Economics and Political Science, vol. 82(328), pages 705-739, October.
    2. Rolf Maier, 2005. "External Debt and Pro-Poor Growth," Macroeconomics 0504031, University Library of Munich, Germany.
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    4. Naeem Akram, 2011. "Impact of Public Debt on the Economic Growth of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 599-615.
    5. Handa, Sudhanshu & King, Damien, 1997. "Structural adjustment policies, income distribution and poverty: A review of the jamaican experience," World Development, Elsevier, vol. 25(6), pages 915-930, June.
    6. Maier, Rolf, 2005. "External Debt and Pro-Poor Growth," Proceedings of the German Development Economics Conference, Kiel 2005 23, Verein für Socialpolitik, Research Committee Development Economics.
    7. Mr. Kadima D. Kalonji & Mr. Boileau Loko & Raj Nallari & Mr. Montfort Mlachila, 2003. "The Impact of External Indebtednesson Poverty in Low-Income Countries," IMF Working Papers 2003/061, International Monetary Fund.
    8. Kenneth Rogoff, 1992. "Dealing With Developing Country Debt in the 1990s," The World Economy, Wiley Blackwell, vol. 15(4), pages 475-486, July.
    9. World Bank, 2001. "World Development Report 2000/2001," World Bank Publications - Books, The World Bank Group, number 11856, December.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Muhammad Shahid & Mahmood Shah & Bibi Aisha Sadiqa, 2019. "Foreign Debt and Debt Servicing Relief Effect Implications in Pakistan: A Poverty Reduction Strategy," Global Economics Review, Humanity Only, vol. 4(4), pages 23-34, December.

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    More about this item

    Keywords

    External Debt; Domestic Debt; Poverty; Johanson Cointegration;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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