DEBT RETIREMENT IN PAKISTAN
The two gap theory suggests that the developing countries have to rely heavily on foreign capital in flows ( FCI s ) to fill two gaps: the import export gap and the savings investment gap.Despite the fact that all developing countries need FCIs for their development the volume the type: The country size and the state of economic development mainly determines the size and type of FCIs .As a less developed country Pakistan has long been relying on foreign aid and has been the largest recipient of foreign direct investment. More over the external debt situation of an individual country may not seem to be interesting when analyzed from an international perspective. For example the external debt situation of a south Asian country as Pakistan. The external debt situation of this individual country has strong repercussions on their development. Debt is the largest capital in flow in Pakistan and it has played a critical role in the country development. The trends and pattern and the terms of have changed much in recent years. Pakistan lacks phy
Figure 1 shows an increasing trend in EDT/XGS and INT/XGS ratios. The external debt liability of Pakistan had a manifold increase in the last decade. Its economic structure remains in flexible and foreign transactions are regulated. Disbursed and outstanding debt increased from:· US $ 9732 million in 1984-1985 · US $ 20322 million in 1993-1994· US $ 10590 million in a decade. Source : WORLD DEBT TABLES, 1990-1991,1994-1995, 1996 WHERE, EDT = TOTAL DEBT STOCK XGS = EXPOPRTS OF GOODS AND SERVICES GNP = GROSS NATIONAL PRODUCT TDS = TOTAL DEBT SERVICE INT = INTEREST PAYMENTS RES = INTERNATIONAL RESERVES CON = COCESSIONAL DEBT. Pakistan has been relying on debt to support development since independence. On the other hand, foreign aid may distort domestic savings, introduce in appropriate technology, and increase the debt burden of the recipient country. 2% for the same period [GOVERNMENT OF PAKISTAN 1995]. 2 % for the period 1988-1989,to 1994-1995, while the debt servicing rose at an annual compound growth rate of 8. sical financial and human capital infrastructure and political and macro economic stability. Pakistan is also under debt of several other countries such as THE UNITED STATES, CHINA, KUWAIT, AND MANY MORE .
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