Impact Of Budget Deficit on the Economy of Pakistan.

Abstract

Pakistan’s depreciating economic growth intimidates a number of socio-economic issues within the country which calls for a sustainable resolve. This study is specifically based on determining the variables that play a significant role in boosting economic growth as a whole. This particular research uses the time-series data of real and nominal GDP (1980-2020) from State Bank of Pakistan that provides a clear indication of budget deficits and how B.D impacted the GDP of the country over the years. Research has also used econometrics tests like Unit Root, Augmented Dickey fuller test, VAR Lag Order Selection criteria, F-Bounds Test and Cusum test. Research has shown co-integration between the variables Budget deficit and economic growth which proves that there is negative relation between B.D and economic growth in context of Pakistan. Keeping in view such results, Pakistan must strive towards balancing the current account deficits and ultimately improve its economic situation.