Bridge financing during covid-19 pandemics: Nexus of FDI, external borrowing and fiscal policy

Abstract

The covid-19 pandemic has unleashed the requirements of immediate changes in various types of investment and financing. The developed and developing countries require compatible infrastructure to live and survive in the new scenario. Majority of developing countries have to depend on foreign direct investment and short-term financing from external sources to build new infrastructure and start the new types of businesses. This situation requires reallocation of foreign direct investment and fiscal resources. The bridge financing through external short-term borrowing may help the institutions in developing countries to maintain their liquidity position for their perpetuity and survival. The study recommends that bridge financing is required to support the economic and business activities during the economic depression and lock down period during the covid-19 and such other crisis. A mathematical model to assess the sustainability of external financing has also been established in the study.

Keywords:

• Domestic credit to private sector
• panel least square
• return on investment
• short-term debt
• tax-to-GDP ratio

JEL CLASSIFICATION:

• C33
• E51
• E63
• H81

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Muhammad Ayub Khan Mehar

Dr. Mehar is serving as professor in Iqra University Karachi. He is also ‘Economic Advisor” of the Employers Federation of Pakistan. He has been serving as Director General (R&D) in the Federation of Pakistan Chambers of Commerce and Industry.