Pakistan, in recent years, has witnessed mounting levels of both external debt and domestic debt. The position with respect to external debt servicing depends upon the growth of exports and home remittances and containment of the current account deficits in the balance of payments. Despite growth of 6 percent in exports and 23 percent in home remittances during the first eight months of 2011-12, the current account deficit has widened to $3.0 billion as compared to $0.2 billion in the corresponding period of last year. On top of this the financial account of the balance of payments has turned negative due to the drying up of foreign direct investment and gross aid inflows in the presence of fixed debt repayments. Consequently, the overall balance of payments position has worsened sharply, leading to a depletion of foreign exchange reserves of the State bank by almost $2.7 billion from the level on June 30, 2011.

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Citation
Institute of Public Policy, Lahore (2013). Trapped in Debt: A Review of Pakistan’s External Debt., Islamic Relief Worldwide, Birmingham, [Online] Available http://policy.islamic-relief.com/wp-content/uploads/2014/05/Working-Paper-Trapped-in-Debt-Pakistan.pdf