Using a three-gap simulation model this paper shows that the privatization sale of public assets to domestic investors can ease the burden of domestic public borrowing and debt but it has no effect on foreign borrowing or debt. The sale of public assets to foreign investors, on the other hand, can reduce the size of external as well as internal borrowing and debt. Furthermore the benefits from privatization can be sustained in the long run if the share of public sector in the productive investment is reduced on a permanent basis. Thus a large-scale sale of public assets within a short period of time cannot solve Pakistan's debt problem.
Eatzaz AHMAD. (1999) RETIRING PUBLIC DEBT THROUGH PRIVATIZATION, Pakistan Journal of Applied Economics, Volume-15, Issue-1.