Pakistani Defense Expenditures and the Macroeconomy: Alternative Strategies to the Year 2000

Abstract

Toward the end of 1988, Pakistan's deteriorating resource situation caused a financial crisis, many remnants of which still exist today. In 1988, the Government's budget deficit reached 8.5% of Gross Domestic Product (GDP), inflation accelerated, the cmTent account deficit doubled to 4.3% of Gross National Product (GNP), the external debt service ratio reached 28% of export earnings, and foreign exchange reserves fell by half to $438 million, equal to less than three weeks of imports.