This study was conducted to evaluate the objectives of external debts, the trend in external debts, and factors influencing debt in Pakistan. Obviously external debt is risky for economic development in both developed and developing countries but the developing countries are more prone to suffer as compared with developed countries. Developing countries are facing the problems of capital scarcity, low saving, traditional technology, poor education and lack of resources for economic development. The analysis shows that total external debt of Pakistan would touched US$ 41.2 billion by the end of fiscal year 2008- 09, it would also increase to US$ 43.152 billion in the fiscal year 2009-10, and US$ 44.904 billion by the end of fiscal year 2010-2011 and further expected to increase to US$ 46.571billion by the end of fiscal year 2011-12 because of the growing inflationary spiral in the national as well as international markets. The main sources of loan for Pakistan are bilateral creditors i.e., group of 20 rich countries, multilateral creditors globally known financial institutions, and others are friends, neighboring countries and trade partners etc. This study suggest some essential measure in order to solve the burning debt issues including; simplicity and austerity in all walks of life which needs to be adopted from top level to bottom, and luxurious consumption oriented imports needs to be curtailed and growth of income and investment level to raise per capita income and aggregate supply of goods and services and propensity of saving in the country. Though expenditure on defence is inevitable but it should be appropriated and foreign direct investment inflows should be encouraged.
Keywords: External Debt, Economic Development, Pakistan