Accessing International Capital: Pakistan’s Experience, Prospects, and Policy Implications

Jamshed Y. Uppal, I. U. Mangla


In the 1990s accessing international capital markets has
become a major source of external financing for many developing
countries. The paper reviews Pakistan’s experience in tapping the global
financial markets. We conduct a cross-sectional econometric analysis of
the factors influencing the access to international equity and debt
capital. Results indicate that the factors as suggested in the earlier
literature do appear to be influential in determining the access to
international capital. The study finds that the role of credit rating in
attracting debt flows and of the local capital markets in attracting
equity flows is prominent. The rate of economic growth is a major
determinant of the access to foreign debt and equity funds. It also
appears that the country rating which is based on a comprehensive set of
variables indicating the financial health of the country subsumes the
other proxies of economic stability and debt management. This study
underscores the importance of institutional factors. Areas where
improvement is possible to facilitate access to the international
capital markets are identified as (1) political and legal environment,
including improvements in the quality of the system of civil laws and
its enforcement (2) private sector development through sustaining
economic liberalisation and privatisation programmes (3) improvement in
macro-economic management through a prudent internal and external debt
management (4) development of capital markets through, improvements in
market operations, enforcement of market regulations, strengthening of
financial institutions and effective dissemination of market

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