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External Debt and Growth: In search of Ceiling for South Asian Economies

Over the past few years, external debt positions of South Asian economies have increased to alarming levels, indicating that those countries are more likely to be exposed to a debt crisis. The inflationary pressure, and weakening characteristics of regional currencies against the USD, make those countries more vulnerable when it comes to servicing debt. On the other hand, given the low domestic savings rate of these economies, they are increasingly compelled to invest significant resources in public infrastructure in order to maintain sustainable growth momentum. Contemporaneously, those countries were also invited to enrich by merging with the synergies of the rest of the world in the fields of maritime, trade, and financial initiatives. In such a situation, where the recent controversy on the debt-growth association is still inconclusive, preserving external debt exposures at an optimal level is incumbent. […]