The Impact of Disaggregated Components of Public Debt on the Economic Growth of Pakistan

Abstract

This study has been initiated to evaluate the impact of the disaggregated components of Public debt and debt servicing on the economic growth of Pakistan. Specifically, we have used Permanent Debt, Unfunded Debt and Floating Debt to measure the impact of domestic debt on growth. To measure the impact of external debt on growth we have used Paris Club Debt, Multilateral Debt and Bilateral Debt. In order to measure the impact of the disaggregated components of Public debt and debt servicing on the economic growth of Pakistan we have applied ARDL technique on time series data of Pakistan spanning from 1976 to 2015. The finding of study indicates that unfunded debt and floating debt, bilateral debt, and multilateral debt have negative impact on the economic growth of Pakistan except Permanent debt and Paris Club debt. Moreover, our finding indicates that Pakistan is facing debt overhanging problem due to of debt servicing. Over all our finding suggest that in order improve the growth Pakistan may go for Permanent Debt and Paris Club Debt instead of institutional and multilateral debt.