An Assessment of Pakistan ' s External Debt Sustainability Escaping the Debt Trap

The findings, interpretations and conclusions expressed in this study are those of the authors and should not be attributed in any manner to the Asian Development Bank (ADB) or the countries it represents. The Asian Development Bank encourages use of the material presented herein, with appropriate credit. Foreword ADB and Pakistan have been development partners for almost 35 years. The first loan provided by ADB to Pakistan was in 1968. ADB's cumulative assistance to Pakistan in the form of public sector loans amount to $12 billion, and the country program has been significantly enhanced over the last few years, increasing to over $1 billion in 2002. During the period 2003 05, ADB plans to provide assistance of about $2.4 billion to the country as detailed in ADB's Country Strategy and Program (CSP) for Pakistan, approved in May 2002. ADB's Poverty Reduction Strategy, approved in November 1999, articulated poverty reduction as ADB's overarching goal and the Bank is committed to supporting poverty reduction efforts in developing member countries. ADB shares a vision for poverty alleviation with the Government of Pakistan and supports the ongoing wide ranging and extensive reform agenda. As ADB's operations in Pakistan increase in scope and become more extensive, ADB's economic and social sector work has also increased accordingly. ADB's Pakistan Resident Mission (PRM) has thus been reorganized to include an Economic and Social Policy Analysis Unit, which is responsible for carrying out policy analysis and research initiatives, and disseminating research findings to a broad audience. Areas of focus for the Unit include monitoring socioeconomic trends, assessment of the evolving situation in key areas such as poverty alleviation, governance and external debt, and analysis of obstacles to growth, both overall and in specific sectors. PRM has recently published a poverty assessment for Pakistan, which has been widely disseminated, and was very well received by academics, policy makers, civil society institutions and the media. PRM is now launching a series of Working Papers, so as to make available ADB's ongoing economic and social sector work to a wider audience. This paper, which addresses issues of debt sustainability, is the first in this series. We hope that PRM's Working Papers will not only contribute to the debate on these key issues in Pakistan, but will prove to be useful for scholars, development practitioners, and policy analysts in particular. Preface ADB's assistance to Pakistan in 2001 amounted to $957.6 million, a …