Impact of Public Debt on Health and Education in SAARC Countries

Abstract

The present study has done to investigate the impact of external debt servicing on health and education spending for the panel of selected SAARC countries (Bangladesh, India, Pakistan and Sri Lanka) are basically developing countries of Asia. This study uses two models of education spending and the other is for health spending by using the data set for 1990-2016 and estimations are carried out by using fixed effect model. Beside other explanatory variables debt servicing is the most important determinant of education spending and health spending and confirm the literature view that high external debt leads to increase in debt servicing liabilities and government do repayment of debt servicing by cutting its expenditure especially on health and education spending as it is easy for government to cut down the social sector spending rather than other sector spending. Other variable Tax revenue and Gross Capital Formation also effect the health and education spending but debt servicing liability effect more. It is best for SAARC countries to use and organize their own resources efficiently and less dependence on external debt and on foreign borrowing and give high attention to education and health spending.