Impact of Expenditure on Economic Growth in Pakistan

Abstract

The Two-Gap Model suggests that the Poor countries have to rely on the foreign capital inflows (FCI) to fill the two Gaps: Import-Export Gap and the Savings-Investment Gap. There are many forms of the foreign capital inflows like FDI (Foreign Direct Investment), External loans & Credit, technical assistance, Project & non-project aid etc. So, UDCs (including Pakistan) have to rely on the Foreign aid, Debt FDI and portfolio investments. The role of these external resources (FCI) always remains questionable. This paper analyzes the impact of the foreign capital inflow on GDP Growth in Pakistan during 1975-2004.