Abstract

The external debt has become a key problem for Pakistan. Pakistan has huge debt to pay, which also entails interest payment on the loan borrowed. It adds burden to the economy of Pakistan. Government through different means try to pay these loans. In this paper we have analyzed the impact of debt servicing on economic growth, i.e. whether debt servicing positively or negatively affect the economic growth. The data collected for this purpose ranges from 1982 to 2008. We have use regression test and find out that debt servicing is positively effecting the growth of Pakistan.

Key Words: Debt Servicing, Economic Growth, GDP, Human Capital, Labor Force

Introduction

Many researchers have focused on the relationship between external debt and growth, and what is the impact of external debt on economy. It also persists to attract considerable interest from economists and policymakers. A large amount of research has been carried out on this topic and substantial literature is also available, but few have conducted research on the impact of debt servicing on economic growth. The conditions and the interest rates on which the loan is provided can vary from donor to donor.