The purpose of this research is to explore the relationship of external debt, external debt servicing and GDP of Pakistan for period 1972 to 2018, considering the country has been facing a serious balance of payments issue since many years. Research objectives include: to understand the impact of external debt on economic growth and has there been any progress after taking the external debt in previous years.
From a theoretical perspective positivism and post positivism is followed as it advocates that only measurable entities and observations are part of knowledge and reality. Objectivism is the epistemological view whereas realism and critical realism is the ontological perspective. The forty-seven years data for this research is collected from State bank of Pakistan and World Bank website. GDP is taken as dependent variable and both external debt and external debt servicing as the independent variables. Experimental research methodology is followed where relationship among variables are estimated by applying statistical analysis method through Ordinary Least Square regression analysis and data is analyzed through E-Views. The empirical result at 10% significance level show that there is a relationship between the external debt and GDP whereas external debt servicing and GDP has no relationship as LNED coefficient p-value shows to be statistically significant at 10 % significance level, hence we reject the null hypothesis that there is no relationship between external debt and GDP. However, LNEDS coefficient p-value shows to be statistically insignificant at 10% hence we cannot reject null hypothesis that there is no relationship between external debt servicing and GDP.