Proposal Defense for Ph.D.

at SoSS USM
Penang Malaysia
 Topic: Workers' remittances, foreign debt dynamics, foreign exchange
reserves and economic growth: An explanatory research in case of Pakistan
 By
 Ashfaque Ali Gilal
 Ph.D. Student
 Matric# P-SD 0022/20 (R)
 School of Social Science (Economics)
 Universiti of Sains Malaysia
 Main supervisor: Dr. Noor Asmat Ismail
 co-supervisor: Dr Siti Asiya Bahar U din
 Outline
 Chapter One: Introduction of the Topic
 1.1 General Perspective
 1.2 Specific Perspective
 1.3 Problem statement
 1.4 Research Objectives of the Study
 1.4 Research Questions
 1.5 Significance (rationale)of the Study
 1.6 Scope (delimitation) and Limitation of the Study
 Chapter Two: Background of the Study
 2.1 Pre Independence situation
 2.2 Early Years of Independence 1947 to 1950
 2.3 Decade of 1950s
 2.4 Decade of 1960s
 2.5 Decade of 1970s
 2.6 Decade of 1980s
 2.7 Decade of 1990s
 2.8 Decade of 2000s
 2.9 Decade of 2010s
 2.10 early 2020s
 Chapter three Literature Review
 3.1 Positive effects of External debt
 3.2 Negative effects of External Debt
 3.3 Neutral or No effects of external Debt
 3.4 Determinants of External debt
 3.5 Theoretical and conceptual Frame work
Chapter Four Methodology and Data Description
4.1 Methodology
4.2 Descriptive Statistics
4.3 Correlation Matrix
4.4 General Model of The Study
4.5 Econometric Model
4.6 Stationary and Non stationary Check up
Chapter One: Introduction

 External debt is understood as an outstanding amount of those actual current, and not
contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some
point(s) in the future and that are owed to nonresidents by residents of an economy (IMF, 2014).
 External debt has been a severe economic problem not only for less developed poor
countries but it has been the head ache for low middle income and emerging economies.
Total external debt burden on these countries has reached to USD 11 trillion which is more
than double of their level of USD 4.4 trillion in 2009 and more than four times of their level
of USD2.3 trillion in 2000. The average external debt to GDP ratio in these countries have
also been hiked from 23% in 2007-08 to 31% in 2020 amidst the sluggish growth rate of GDP
in these countries specially after 2007-08 financial crisis. If we exclude the external debt of
china, the average external debt to GDP ratio for rest of the developing countries becomes
13 point percent higher than the overall average ratio and reaches to 44% of their GDP
despite the fact that china’s external debt stock grew slightly higher than the average of rest
of developing countries but since her GDP grew at relatively higher rates in china so her
External debt to GDP ratio is less than the rest of the developing countries from 2009 to
2020.
Debt service of developing countries

 In absolute terms the external debt servicing on total external debt stock of USD
11 trillion was USD 3.9 trillion during 2020. Of the total debt servicing of USD 3.9
trillion, USD 3.5 trillion was principal payment and USD 0.4 trillion is interest
payment on medium and long term (MLT) loans whereas rest was on the short
term loans. The severity of the foreign debt problem is observed from the fact
that the Venezuela, Argentina and Lebanon have defaulted on the foreign debt
and liabilities before pandemic of covid-19 and now are facing very serious
consequences and have been indulged in hectic and dooming legal proceedings
with every individual creditor striving to negotiate with them which is resulting
the serious dead weight loses for each country till the problems are resolved.
Moreover about 90 countries have approached the IMF to achieve emergency
financial arrangements during the pandemic of Covid -19 which indicates that
foreign debt is not just a problem of low income countries and African countries
but it is global phenomenon. (Kharas, 2020)
Intro………….. Conti…
External debt to GDP ratio in developing
countries
Region wise external debt of developing
countries
Matter of concern
Matter of concern Debt Service as % of
Revenue
 Table. 1

Defaults at Various Times

S.No. Country/ region Year of default/ debt crisis

01 Latin American countries Late 1970s
02 Cost Rica 1981
03 Mexico 1982 and 1994
04 North Korea 1987
05 East Asian countries Thailand, Indonesia 1997-98
South Korea Philippines and Malaysia
06 Brazil 1998-99
07 Russia 1998-99
08 Pakistan 1998-99
09 Turkey 2000
10 Argentina 2001
11 Pakistan 2008
12 Greece 2010-2012
13 Venezuela, Argentina and Lebanon 2018-19
14 Sri Lanka 2022
SDG # 17 Partnership for the Goals states “Strengthen
the means of implementation and revitalize the global
partnership for sustainable development”

 Goal # 17.4.1 states that “Assist developing countries in attaining long-term

debt sustainability through coordinated policies aimed at fostering debt
financing, debt relief and debt restructuring, as appropriate, and address
the external debt of highly indebted poor countries to reduce their debt
distress” (UN vision 2030
Equation for Demand for external debt

 Inflows-outflows = 0 ( No need to borrow from abroad)

 Inflows-outflows > o ( instead of borrowing a country can lend)
 Inflows-outflows < o (country will be compelled to borrow from abroad)
 X+WR+FDI+PFI+TR+ – (M+EDS+KF+Forex)
 For example in case of Pakistan.
 32+31+2+1+1 – (75+11+5+10)
 67-(91+10)
 USD-34 billion
 Where X= exports, WR = worker’s remittances, FDI=foreign direct Investment,
PFI=port folio investment, TR=Transfers, M= imports, EDS= external debt servicing
and KF= capital flight, Forex = foreign exchange reserves
 Table-2
Table 3
Source: International debt statistics 2021 UNCAD World Bank

Comparison of Pakistan and Sri lanka

External Debt ratios of 2009 2015 2016 2017 2018 2019 External debt ratio of Sri Lanka 2009 2015 2016 2017 2018 2019
Pakistan
External debt stocks to exports 214 257 266 264 258 285
External debt stocks to 247 228 265 285 297 324 (%)
exports (%)
External debt stocks to GNI (%) 47 56 58 60 62 69
External debt stocks to 33 23 25 27 28 34
GNI (%) Debt service to exports (%) 16 21 19 22 36 32

Debt service to exports 15 14 16 22 19 35 Short-term to external debt 18 17 16 16 15 15

(%) stocks (%)

Short-term to external 3 10 10 10 9 9
debt stocks (%) Multilateral to external debt 30 16 15 15 15 15
stocks (%)
Multilateral to external 42 37 35 32 30 30
debt stocks (%)
Reserves to external debt stocks 24 15 11 14 12 12
Reserves to external debt 20 27 27 18 10 13 (%)
stocks (%)
Gross national income (GNI) $ 41.581 78.582 80.205 85.114 86.028 81.591
Gross national income 172.56 287.068 295.741 321.203 331.344 296.935 billion
(GNI) $ billion 4
Trends in Domestic and external Debt
Trends in Domestic and external Debt
Increasing portion of commercial short
term borrowing A matter of Concern
Maturity profile
Composition of total debt
Composition of the debt
Source: Economic Survey of Pakistan 2022
Composition of external debt

 Pakistan’s external debt comprises on four key elements 48% from

multilateral, 30% bilateral, 9% euro bond/sukkuk and 13% commercial loans
which have increased in recent years indicating increased risk on external
debt account. (GoP, 2022)
Composition of external debt
External Debt
Increase in Total Public Debt
 O.1. find out the main
determinants of External debt
in Pakistan

O.2. ascertain relationships O.4. to find out the various

between external debt with remedies through which
GDP, Trade deficit, Fiscal Research Pakistan can get rid of from
deficit, Worker’s external debt.
remittances, foreign
objectives
exchange reserves, debt
servicing

O.3. to investigate role of regime O.5 To look over that either trade
and corruption behind the deficit is dominant factor behind
unsustainable accumulation of the heavy external borrowing or
external debt Fiscal deficit is the dominant factor
 What are the main determinants
of external debt in Pakistan?

How can Pakistan bring back her Is there any role of

external debt at sustainable Research corruption and regime type
level? Questions behind the large debt
accumulation of Pakistan?

What is relationship (SR & LR)

amongst external debt and trade
deficit, Fiscal deficit, worker’s
remittances, foreign exchange
Reserves, GDP and debt
servicing.
Problem Statement

 Statement of Social Need : the less developed and developing world under great risk as their external debt is at
unsustainable level USD 11 trillion 44 to 45% of their GDP and its debt Servicing USD 3.9 Trillion 3 to 4% of their
GDP. Human capital formation (education and health and skill development) and social sector (Poverty,
inequality and unemployment) is compromised.
 ED is increasing on average by 18% to 19% per year
 In Pakistan National Strategic security is linked with Pakistan Economic Security in new Policy
 Statement of Gap: (theoretical gap) two important Variables 1. worker’s remittances and foreign exchange
reserves have not been included in previous studies particularly in case of Pakistan.
 (Methodological gap) None of the previous studies have applied NARDL method of data analyzing the data in
case of Pakistan
 How to fill the Gap/ contribution: value addition of updated comprehensive and holistic Study in existing body
of knowledge on the topic
 this study will fill this gap by incorporating these two variables WR and Forex by quantitatively analyzing their
effect and relation on/ with external Debt by applying NARDL model
 Value additional in theoretical and conceptual frame work in the field of study of external debt.
Scope and Limitation

 This study will be carried out in case of Pakistan from 1976 to 2022 by
covering the main determinants of external debt such as GDP, Exports,
Imports, Government Development expenditure and neglected variables by
previous studies on the topic like worker’s remittances and foreign exchange
reserves. There may be some Time constraint and financial issues while
conducting this study. However if occurred, they will be managed through
alternative sources such as project funding, any scholarship or at last but not
least through personal finance.
Back ground of the study

 Lower and fluctuating GDP growth rate

GDP growth (annual %)
12

10

0
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
 chronic burgeoning trade deficit

5000000000

0
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
-5000000000

-10000000000
trade balance

-15000000000

-20000000000

-25000000000

-30000000000

-35000000000

-40000000000

chart for trade balance from 1972 to 2021

 persistent and increasing Budget deficit

Fiscal Deficit % of GDP

0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
-1

-2

-3
Fiscal Defict % of GDP

-4
-4.6
-5
-5.5 -5.3
-6 -5.8
-6.3 -6.5 -6.5
-7 -6.8 -7

-8 -8.2 -8.1

-9 -9.1

-10

year
Increasing External Debt and its
servicing cost
External debt

1.20E+11

1.00E+11

8.00E+10

6.00E+10

4.00E+10

2.00E+10

0.00E+00
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
External Debt servicing

Total debt servicing on external debt in Pakistan

1.00E+10

9.00E+09

8.00E+09

7.00E+09

6.00E+09

5.00E+09

4.00E+09

3.00E+09

2.00E+09

1.00E+09

0.00E+00
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
Depleting and fluctuating Foreign
exchange reserves
Foreign exchange reserves
2.50E+10

2.00E+10

1.50E+10

1.00E+10

5.00E+09

0.00E+00
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
Stagnant Government Revenue

Total, tax and Non tax Revenueof Pakistan

25

20

15

10

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
BE

Total Revenue Tax revenue Non tax Revenue Series3

Supportive and increasing worker’s
remittances
Worker's Remittances
3.00E+10

2.50E+10

2.00E+10

1.50E+10

1.00E+10

5.00E+09

0.00E+00
1970 1980 1990 2000 2010 2020 2030
Increasing Corruption

corruption perception Index of Pakistan

35

30

25

20

15

10

0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Literature Review

 When we go through the existing literature on the topic of external debt we

find the research studies have been conducted on four main segments/
themes which shows there is vibrant debate among the researchers on effects
of external debt on economic performance of the countries.
 Positive effect of external debt on GDP growth rate.
 Negative effects of external debt on GDP growth rate and Investment
 Neutral or No effect of External debt on GDP growth
 Determinants of external debt
Positive effects Before 1980s

 USA Marshal Plan for reconstruction and rebuilding the war torn Europe (USD15
billion) 1947 to 51
 Harrod (1939) Dommer Model (1946) Big Push theory by P.N. Rosenstein-Rodan
(1943), lewis surplus labor model and other development models (1954) and Solow
growth model (1956),
 Chenery and Strout (1966) recognized various research studies that endorsed the
output enhancing role of foreign debt through decreasing the foreign exchange
constraints and saving-Investment hole.
 Rosen (2002) was of the view that Governments face the revenue constraints and
if return on investments from borrowed fund is greater than its cost then financing
fiscal deficit through domestic or foreign debt can lead to improved economic
performance by fulfilling the physical capital formation requirements of the
society and providing social welfare Transfer programs for the masses.
Positive effects of external debt

 Palitha Pathberiya and Albert Wijeweera (2005) analyzed the data of five decades in case of Sri Lanka. They found that Sri
Lanka has not allocated the foreign debt in productive and development projects hence the cost of external debt that is 3% has
been greater than the return of foreign debt. Resultantly the country has accumulated heavy external debt Burden equal to
USD 10.billion up to 2003. The country’s capacity to serve its foreign debt liabilities has been weakened despite substantial
wave offs during the time of disastrous Boxing Day Tsunami in 2004. Besides the currency value has been massively decreased
due to persistent and burgeoning current account deficit, deteriorating terms of trade thanks to heavy reliance on imports.
 Rashid Zaman and Muhammad Arslan (2014) employed the OLS Model to find the relationship between GDP and external debt,
Gross capital formation and national Savings by using the data for 39 years. They established that there is significant positive
relationship between GDP of Pakistan and External debt and Gross capital formation whereas National savings have no any
significant impact over GDP of Pakistan which means most of the capital formation is being done from external resource
 Murthey et.al (1994) used Co integration analysis and Johansen’s maximum likelihood procedure to show that foreign aid had a
positive impact to economic growth in Cameroon during 1971 to 1990.
 Islam (1992) contended that foreign resources, in highly aggregative form did not show any significant contribution to
economic growth in Bangladesh. However, loans and food aid appear to exert a stronger influence on economic growth than
the other categories. He also found that domestic resources exert a much stronger effect on economic growth than foreign
resources.
 Levy (1988) concluded that external economic aid and economic growth were positively correlated.
 And some other studies show positive effects
Negative effects of external debt after 1980 debt
crisis in Latin America and Sub Sahara African
Countries
 Debt Over hang theory by Paul. A Krugman 1980
 Cunningham (1993) found the statistically significant adverse effects of huge burden of debt service on
productivity of labor and capital by employing the standard production function in heavily indebted
countries like Brazil Venezuela Argentine, Chile, Jamaica, Ivory Coast, Philippines, Yugoslavia, Bolivia,
Colombia, Ecuador, Nigeria Cost Rica and Mexico.
 Muhammad Ramzan and Aitzaz Ahmed. (2014) found that GDP growth is negatively related with external
debt to export, and external debt services to export ratio in Pakistan by using time series data from 1970
to 2009 and estimating two equation through ARDL model; one with policy variable and other without
policy variable. However there is positive and highly significant relationship between GDP and trade
openness and Secondary enrolment in both short run as well as long run variable while the budget deficit
and inflation have insignificant effect on GDP growth rate in equation with policy index. The Policy index
variable has also positive and significant effect on GDP of Pakistan.
 Khurram Ejaz Chandia et.al (2019) used two dynamic equation to investigate domestic and external debt
sustainability through incorporating differentials of the variables and were of the view that Primary
budget deficit and current account deficit have played a significant role in both Public as well as external
debt accumulation in India and Pakistan. The study finds that Public and external debt are sustainable in
India and Pakistan but in a weak form
Negative effects

 Abdul Ghafoor and Humaira Qasim (2020) showed that external debt, Debt servicing and imports are negatively related with GDP growth rate
whereas Gross capital formation, Exports and Employed labor force are positively related with GDP growth rate in case of Pakistan. They applied
ARDL model by using time series data from 1980 to 2017.
 Mohsin, Maria and Naveed (2012) performed their research about causes of GDP growth rate in Pakistan by using time series data from 1980 to
2010 and applying Johnson & Joselin co-integration test, granger causality and impulse response function to analyze the long run and short run
relationship between GDP and External debt, capital formation, exports and employment rate of Pakistan. They found that there exists
bidirectional causality between external debt and GDP growth rate and unidirectional causality runs from capital stock (K) to external debt (ED),
output (Y) to external debt (ED), employment (EM) to export (EX) and employment (EM) to capital stock (K). But there is also bidirectional
causality between output (Y) and capital stock (K) there is also long run relationship between e external debt and GDP growth rate.
  
 HAKIMI Abdelaziz1 et. al. (2019) ascertained the main determinants of external debt in Low-Income Countries by employing panel data for two
groups of countries less indebted poor (12) countries and highly indebted poor (11) countries from 2000 to 2017 and estimated two separate
equations by using seemingly un related M (SUR) model for two groups of countries. They found that External debt significantly decreases
investment and economic growth for both the total sample and the sub-samples. In addition, they found that trade openness is positively and
significantly related to the level of growth per capita. This positive association is confirmed for both the total sample and the split sample.
Findings also indicate that the level of growth exerts a positive and significant effect on investment for the total sample and for less indebted
countries
 Anidiobu, G.A et. al. (2020) conducted their research about the effects of external debt on Economic growth of Economic community of West
African states (ECOWAS) region by using panel data from 1985 to 2017 and applying panel random effect model. They discovered that there is
negative and significant impact of foreign capital inflow (external debt as a proxy) on GDP growth rate of Economic community of West African
states (ECOWAS).
 And other studies
Neutral or No effects of external Debt

 Some researchers are of the view that Government expenditures financed

through debt do not trigger Economic growth as consumers and Investors will
consider that the borrowed money will be repaid by imposing heavy taxes in
future. Resultantly they neither increase consumption nor investment that
might generate economic activities and boost output and employment as
envisioned by David Ricardo in his famous proposition of Ricardo-
equivalence. Baro (1989) advocated that there is no any significant effect of
External debt on Economic growth of recipient countries.
Literature on Determinants of external
debt
 Arslan E. & Al Athwari, B (2019) conducted the research on determinants of external debt in case turkey. They
established that there is long term relationship between external debts and related mentioned variables like External
debt, GDP, Exports, Imports, Debt service, foreign direct investment, foreign exchange reserves and exchange rate in
Turkey. They used time series data from 1980 to 2017 and applied Vector auto regressive models (VAR) such as
Johansson co-integration test and Granger causality test.
 Chukwuebuka Bernard Azolibe (2020) found that External debt is positively and significantly dependent on corruption,
Unemployment, foreign aid and negatively and significantly related with foreign exchange reserves and GDP growth
rate. He suggested that in order to manage the external debt in these countries, Good Governance should be focused
and corruption should be kept under control in order to utilize the borrowed money on productive projects rather
than on luxuriousness.
 The literature highlights that the rich countries (center or core) have trapped the poor south (periphery) countries
deliberately as suggested by Dependency theory and Neo-Liberalism model. According to these theories the political
elite in less developed and developing countries serve the interests of rich countries in pursuance of their individual
personal gains.
 Brian-Vincent (2008) considers that IMF, World Bank and other western IFIs and corrupt rulers are responsible for debt
crisis in Africa particularly in Nigeria under the legacy of dependency theory and Neo-Liberalism while analyzing the
historical colonial and neo colonial Policies of Rich North (center or core) countries Dependency theory is of the
notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states,
enriching the latter at the expense of the former.
Determinants of External debt

 While explaining the causes of external debt in Pakistan, Bilquees (2003) was of the view that persistent budget deficit culminated by
primary deficit is the main cause of public debt in Pakistan. She used the three gap Model; revenue expenditure gap, export-import gap and
saving-investment gap to analyses the effects on budget deficit on debt of Pakistan. She found that main cause of the public external debt
in Pakistan during 1980s and 1990s was Government’s Policy to completely ignore the domestic resource mobilization due to easy access to
and availability of foreign resources and heavy inflows of worker’s remittances
 The literature points out that the non-development expenditures in general and defense expenditures in particular in heavily and severely
indebted countries are main reason behind the high accumulation of external debt. M.shahbaz et.al (2016) showed in their research that
military spending has short run as well as long run positive relationship with external borrowing in case of Pakistan. They used econometric
model of ARDL bound test for the data set of 1973-2009. Where they found that GDP growth rate has negative effect on external debt.
 The literature on causes of external debt in Pakistan demonstrates that there are various macroeconomic indicators such as Governments
choice to finance its current expenditures through external borrowing. Cheema (2004) conducted the research in case of Pakistan by
analyzing macroeconomic indicators during 1997 to 2003. He found that the main reason behind the heavy borrowing from abroad by
Governments was its choice to finance its current public expenditure through external borrowing. He recognized that growing non
development public spending like debt servicing and military expenditures, chronic twin deficits, consistently lower Economic growth rates
and mismanagement of economy were the main reasons behind heavy and unsustainable accumulation of external debt in Pakistan during
1990s. He also noted that 63.5% of total Public spending in 1998-99 was allocated to only debt servicing. His results matched with the
previous findings of Tahir (1998), Anwar (2002) and Chaudhary Ahmad (1999).
 Abdul waheed (2017) identified nine different Macroeconomic determinants of external debt in these two different groups oil exporting and
oil importing countries that are GDP, CA balance, GGR, GGE, Inflation, POIL, reserves and Investment in oil exporting countries and GDP,
trade balance, GGR, POIL, interest on external debt, FDI GDS and Investment in oil importing countries. He used Panel data for 12 oil
exporting countries and 12 oil importing countries separately by incorporating the data from 2004 to 2013. He suggested that we should not
generalize the determinants of external debt for all countries as they differ from country to country.
Determinants of external Debt

  Kevin Greenidge, Lisa Drakes & Roland Craigwell (2010) carried out their research to ascertain the
determinants of external debt in Caribbean community (CARCOM) by applying Panel data model, Dynamic
ordinary least square Model and incorporating panel data from 1987-2005. They concluded that GDP growth
rate, Export earnings, Real Effective Exchange rate and real interest rate as negatively related with external
debt liabilities and Government spending deviation from average level positively related with external debt
 Korhan Gokmenoglu and Rabiatul Adawiya Muhammad Rafik (2018) investigated the major causes of external
debt in Malaysia by using time series data from 1970 to 2013 and applying co-integration, Vector error
correction model (VECM) and granger causality test. They found that There is integration between the
variable which means long run relationship, VECM shows that there is no short run and significant
relationships between the variables, Granger causality test result shows that external debt granger cause
exchange rate depreciation, recurrent expenditure, capital expenditure and GDP precedes the external debt.
They said that GDP growth, recurrent expenditures, capital expenditures and exchange rate are the main
determinants of external debt in Malaysia as there exists long run relationship among these variables
 . The main causes of heavy external debt are: external debt itself, its associated burgeoning debt servicing,
slower GDP growth rate, widening trade deficit &fiscal deficit, sky rocketing oil prices and finance related
variables such as volatile exchange rate, falling foreign direct Investment, higher interest rate differentials,
higher Money supply, increasing inflation, deteriorating terms of trade, depleting foreign exchange reserves,
enrolment ratio, growing population growth rate etc.
Tentative Model

 Model: tentative model is as under

  
 Where:
 EDL= Log of external Debt LTD = Log of trade deficit
 LFD= Log of Fiscal deficit
 LREM= log of remittances
 LFER= log of foreign exchange reserves
 LDS= log of debt Servicing
 LGDP= Log of Gross domestic product µ= white noise error term
Null hypothesis and expected
relationship
 Null Hypothesis:
 β1 to β6 = 0
 Explanation for expected relationship based on theoretical & conceptual
frame work.
Data & Methodology

 Data: Time series secondary data of above variables from 1976 to 2022 will be
obtained from various Issues of Economic survey of Pakistan issued by Finance
Department, Annual reports of State Bank of Pakistan, International financial
statistics issued by IMF and world development indicators issued by World
Bank.
 Methodology:
 Data in log form will be analyzed first through descriptive statistics and then
by employing appropriate time series econometric model such as VAR ECM
granger causality ARDL or NARDL by considering the properties and
characteristics of data in E-View to estimate the estimators.