Growing External Debt in Pakistan and its Implication for Poverty

This study investigates the effectiveness of external debt in determining socio-economic economic development in Pakistan during the period from 1973 to 2013 using time series data. For analysis, Ordinary Least Square (OLS) and Augmented EngelGranger (AEG) test is used. The results from AEG test show that there is co-integration and long run bond between external debt and poverty. The results provide strong evidences that poor economic performance have significantly aggravated economic downturn and augmented poverty level. Growing external debt services have unfavorable impacts on poverty level and income inequality as less has been left to finance expenditures on social services and poverty reduction. Poverty level and income inequality can be useful indicators of the Pakistan's initiatives on debt reduction goals and debt relief