Abstract:
This paper discusses how poor debt management combined with the policies
of donor agencies (particularly the IMF) have brought on the present domestic and
foreign debt crises. The paper presents a qualitative account of the debt in Pakistan
and then analyzes the debt data using various debt burden indicators. After the
analysis of the economic and social costs of debt overhang in Pakistan, it is found that
net foreign resource flows to the private and public sectors tended to crowd out
private and public savings respectively and that public savings is crowded out by
resource flows from the private sector to the public sector. Finally, the results of the
paper find that the resource allocation between development and non‐development
expenditure did not depend on whether government expenditure was financed by
revenues or government borrowing and that more resources are directed towards
development activity when government expenditure is financed by foreign resource
flows rather than domestic resource flows.
