Abstract:   The objective of this research is to study the relationships between the two variables, external debt and exports performance within the reach of Pakistan. The data used for the study was selected by annual time series from 1972 to 2014. According to the co-integration analysis done for the study there was a significant negative relationship between export performance and external debt in Pakistan. Whereas when the Error correction model was used, the results pointed out an inconsequential relationship in short run within the two variables, external debt and exports in the short run. The next test of stability analysis confirms that long run model is stable whereas, the granger causality test claims an unidirectional relationship from external debt and exports; the result of impulse response also confirms the negative relationship between exports and external debt in Pakistan; further the result of FMOLS states that the initial results are vigorous; the major reasons for the negative link between the two variables exports and external debt is the IMF conditionality to Pakistan that it has to raise revenue by increasing indirect taxes and increasing energy prices. It is suggested that dependency on external debt should be discouraged and this gap of foreign inflow should be covered with foreign direct investment and inflows of workers? remittances and by increasing export earnings in the country. Government should improve the regional trade agreement and should avail the opportunity of GSP plus (Generalized Scheme of Preferences) status by improving the law and order situation. It is also suggested that government should control the failure of power supply and export allowances should be given to the Export Processing Zones. These are the earliest measure that should be taken to minimize the negative effects of external debt on export performance in the country.

Keywords:   Export, External Debt, Pakistan, Time Series Analysis.

Publisher:   ILMA UNIVERSITY

Published:   1 December 2017

Issue:   Issue 2 : Volume 13

E-ISSN:   2409-6520

P-ISSN:   2414-8393