CRITICAL REVIEW

ARTICLE: The Profile of Debt Structure: Monetary &

Fiscal Policies A Case of Pakistan (1971-2007)

ASSIGNMENT#1
ISSUES OF PAKISTAN’S ECONOMY

Submitted To:
DR. ASLAM CHAUDARY
Submitted By:
MARYAM SHARIF
M.PHIL-I
ROLL# 12-27007

14TH MARCH, 2010

 Pakistan Economic and Social Review
Volume 46, No.2 (Winter 2008), pp.201-234

The Profile of Debt Structure: Monetary & Fiscal Policies A Case of Pakistan
(1971-2007)
In this paper the complete structure of public debt for the past three decades has been
explained in the context of fiscal and external sector imbalances as the key determinants of
public debt burden. The very basic question that has been addressed in this paper is whether the
structure, composition and growth of public debt has changed overtime and to what extent the
combined impact of fiscal and monetary management in general and the reform policies in
particular have affected the burden of debt stock, its structure, composition, growth and debt
servicing. In this paper a comparative debt indicator analysis has been undertaken in order to
carry out meaningful comparison of pre and post 2000 debt to the GDP ratios.
The analysis presented in this paper indicates that although a modest improvement in the public
debt situation has been attained yet the structure of debt remains unchanged, the stock of debt
has increased; growth of public debt has remained positive throughout and is quite high
presently. The share of domestic debt is higher as compared to the external debt and the
combined share of floating and unfunded debt in domestic debt remains very high. The increased
Critical Review:-
The paper provides a good source of understanding of the complete profile of the public debt
structure but there are several limitations that must be considered. These are discussed as below:
1. In this paper the author has used the data set as the average for the decades i.e. 1970s,
1980s, 1990s and 2000s, but he has not taken the data for complete decade of 2000,
rather he has just taken the data till 2007. Therefore, the study does not represent the clear
picture of the debt structure for the decade of 2000s.
2. In this paper it has been mentioned that, with the exception of the decade of 2000s, the
combined share of external borrowing and domestic bank borrowing in deficit financing
has remained high, i.e. their total share declined from 59% in 1990s to 38.5% in 2000s.
But no reason or justification has been provided that why this share fell sharply in 2000s.
3. Moreover the author has mostly given the numerical facts and figures of the debt ratios
for different years but the theoretical reasoning for the fluctuations have not been
explained, which creates an ambiguity about the data.
4. Further this paper can be criticized on the grounds that the author has explained that in
order to make the fiscal adjustments, i.e. to reduce the debt burden and control the fiscal
deficit, the expenditures on the development projects are cut down and not the non
development expenditures. Therefore, he did not explain the other way round that is, if
the non development expenditure will rise it will put an upward pressure on the debt
burden and hence the fiscal adjustment is not met.