Abstract
Over the years, the South Asian countries were facing the dilemma of twin’s deficits because they had
failed to generate sufficient revenues to finance their budget. Consequently, they were continuously relying
on both domestic and external debt to bridge these deficits which had put a severe implication on their
economic growth. Their financial position continued to deteriorate and undermined all the efforts of the
governments made to stimulate economic growth. The governments in these countries failed to generate
enough revenues through internal sources. Therefore, the deficits were normally fiancé through external
sources. The paper examined whether the external debt was a blessing or course to the economic growth of
South Asian countries i.e. Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. For this
purpose 30 years of panel data of these countries from 1990 to 2019 had been taken. Fixed effect model
and Panel Autoregressive Distributive Lag (ARDL) Approach had been applied to examine the short-run
and long-run association among the variables. The natural log of GDP per capita was used as a proxy for
economic growth. The other variables were external debt, initial GDP, foreign direct investment, trade
openness, investment, and secondary school investment rate. The outcomes of the study indicated that that
external debt had a negative impact on economic growth both in the short-run and long-run. This revealed
that external debt had not been utilized effectively and productively. The study suggested that effort would
be made to manage the external debt and reduced the twin's deficits to minimize the harmful impact of
external debt on the economy.
MUHAMMAD REEHAN HAMEED, MAJID ALI , HAFSAH BATOOL. (2020) Is External Debt a Boon or a Curse? Empirical Evidence from South Asian Countries, International Review of Management and Business Research, Volume 9, Issue 4 .
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