Role of External Debt and Trade Deficit in Economic Performance of Pakistan

Safdar, Noreen; Liaquat, Malka; Bibi, Saima

doi:10.52700/assap.v2i1.29

Cited by 6 publications

(5 citation statements)

References 2 publications

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“…The interest load of external financing may absorb important government revenues. Huge external debt means capital outflow in the form of interest, which will discourage the development of the country (Akram, 2011;Atique & Malik, 2012;Safdar, Liaquat, & Bibi, 2021). The government should increase domestic savings and decrease useless spending rather than relying on extensive foreign assistance.…”

Section: Analysis Of Empirical Resultsmentioning

confidence: 99%

Public Financial Management and Growth Interaction: Evidence from the Two-Stage Least Square Approach

Ashraf¹,

Jamshaid²,

Batool³

2021

Int. j. bus. econ. aff.

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Financial Management in the Public sector is an essential part of the country's development process. Public Sector Financial Management (PFM) encompasses the collection and utilization of revenue. Financial Management Reforms are developments and change over time in finance. In this context, the objective of this study is to explore the impact of PFM on output growth in the case of Pakistan. This study also investigates the effect of public sector financial reforms (implemented in the 1990s) on GDP, the proxy of output growth. Tax reforms included in this study to show a structurally different tax pre and post. The time-series data covering the period from 1977 to 2018 has been taken in this study.Econometrics methodology includes Unit root test, Causality test, and Two-Stage Least squares (2SLS). The 2SLS approach is implemented due to endogeneity. There is an existence of reverse causation between the variables, which shows that the change in domestic and external debt shows bilateral causality with output growth. The results of 2SLS show that PFM has a promising impact on output growth. In this regard, domestic debt positively and external debt is negatively associated with output. The government spending on social services, community services, economic services, and reforms positively impacted the economy.On the other hand, government expenditure on administration, defense, and transfer of payment results in decreasing output. Therefore, the study concludes that the behavioral trend, the social context, and time limits set for the achievement of set goals must be considered by effective public sector financial management in Pakistan. This paper will help policymakers allocate the limited resources and help in strategic priorities to spur reallocation from lesser to higher priorities to ensure allocation efficiency.

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Section: Analysis Of Empirical Resultsmentioning

confidence: 99%

Public Financial Management and Growth Interaction: Evidence from the Two-Stage Least Square Approach

Ashraf¹,

Jamshaid²,

Batool³

2021

Int. j. bus. econ. aff.

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“…There is a statically important and negative influence of trade deficit and external debt on GDP (Safdar, Liaquat, & Bibi, 2021). Fiscal deficit, nominal exchange rate, and trade openness have a positive and statistically significant association with external debt (Awan, Anjum, & Rahim, 2015).…”

Section: Trade Of Balancementioning

confidence: 99%

Measuring the Connotations of Economic Variables with External Debts of Bangladesh

Uddin

Rashid

Islam³

et al. 2022

5007

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This study ascertains the associations of the macroeconomic variables with external debts, the impacts of external debts on annual GDP, GDP growth, and per capita income, and the timing effects on the economic variables of Bangladesh. The analysis is inferential and eight hypotheses have been set and tested with the regression analysis. To complete the study, the chi-squared test and Durbin-Watson test have been used along with trends and growth analysis. The results of the study reveal that the budget deficit, current account deficit, and defense budget have a positive association with external debts. Furthermore, foreign direct investment, foreign exchange reserve, foreign remittance, and trade of balance have a negative association with external debts. The external debts have no negative impact on annual GDP, GDP growth, and per capita income. Finally, there is a significant timing effect on the economic variables of Bangladesh during the study period.

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“…They show that increasing the deficit ratio to GDP has a beneficial influence on the GDPg. Similarly, Safdar et al (2021) use the VEC approach to inspect the impact of trade deficit and foreign debt on Pakistan's economic performance between 1980 and 2017. According to the study, the trade imbalance has a statistically noteworthy and harmful impression on GDPg, as well as total After the review of the literature, some empirical research yielded conflicting results, indicating that the FD had a positive or no negative impact on GDPg.…”

Section: Literature Reviewmentioning

confidence: 99%

The impact of fiscal deficit on economic growth: empirical evidence from Pakistan and Afghanistan

Masheed,

Hassanzai,

Ullah

et al. 2024

Lib. Arts Soc. Sci. Int. J.

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The economic crises of Pakistan and Afghanistan are linked to the high fiscal deficit in the past, which has affected economic growth. The research aims to investigate the effect of fiscal deficit on economic growth with the data from 1973 to 2022 in Pakistan and 2002 to 2022 in Afghanistan and the ARDL procedure to estimate the model. The study investigates whether the fiscal deficit improves economic growth and how much the deficit can be minimised to maintain economic stability in Pakistan and Afghanistan. This study found that, over a long period, the fiscal deficit adversely impacts GDP growth in Pakistan. Similarly, the national debt has an adverse effect on GDP growth in Afghanistan. Moreover, in the near run, the fiscal deficit has a negative effect on GDP growth in Pakistan. Similarly, the national debt has a negative effect on GDP growth in Afghanistan. Therefore, this study concluded that the fiscal deficit harms GDP growth and does not support the Keynesian theory regarding the deficit in Pakistan and Afghanistan. Thus, this study endorsed that the government should increase the revenue to cover expenditures to eradicate or lessen the fiscal deficit and debt.

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Role of External Debt and Trade Deficit in Economic Performance of Pakistan

Cited by 6 publications

References 2 publications

Public Financial Management and Growth Interaction: Evidence from the Two-Stage Least Square Approach

Public Financial Management and Growth Interaction: Evidence from the Two-Stage Least Square Approach

Measuring the Connotations of Economic Variables with External Debts of Bangladesh

The impact of fiscal deficit on economic growth: empirical evidence from Pakistan and Afghanistan

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