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External Debt Sustainability Analysis for Pakistan: Outlook for the Medium Term

Author

Listed:
  • Sabina Khurram Jafri

    () (State Bank of Pakistan)

Abstract

This paper estimates Pakistan’s external debt by using Debt Sustainability Assessment (DSA) technique. The main findings of the paper are that as a result of small individual shocks to main components of external debt evolution i.e., real GDP growth, non-interest current account balance to GDP ratio and the ratio of net non-debt creating capital inflows to GDP, the country’s external debt to GDP ratio will increase though, but would remain within safe limits. Secondly a significant 30-40 percent depreciation of the exchange rate has the potential to cause the debt to GDP ratio breach the debt threshold level indentified for Pakistan. Finally, a large combined shock to real GDP growth, non-interest current account balance to GDP ratio, and the ratio of net non-debt creating capital inflows to GDP together will also result in a need for another debt rescheduling. Length: 20 pages

Suggested Citation

  • 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.
  • Handle: RePEc:sbp:wpaper:27
    as

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    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp27.pdf
    File Function: First version, 2008
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    References listed on IDEAS

    as
    1. Nadeem A. Burney, 1988. "Determinants of Debt Problem in Pakistan and its Debt-servicing Capacity," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(4), pages 805-818.
    2. Philippe D Karam & Douglas Hostland, 2005. "Assessing Debt Sustainability in Emerging Market Economies Using Stochastic Simulation Methods," IMF Working Papers 05/226, International Monetary Fund.
    3. Pervez Hasan, 1999. "Pakistan’s Debt Problem: Its Changing Nature and Growing Gravity," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 435-470.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    External debt; sustainability; Pakistan;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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