This paper intended to analyze key Macroeconomic factor’s effect on Pakistan’s economic development. The annual time-series data has been taken from 1980 to 2018 on External Debts, Foreign Direct investment. Consumer Price Index and Term of Trade. Variables stationarity is analyzed by ADF and Ng-Perron tests; afterwards, JJ test and Granger Causality test are used for Long-run (LR) & Short-run(SR) associations between variables, respectively. Also, Residuals Diagnostic Test used for checking residuals assumptions and CUSUM and CUSUMSQ are used for checking parameter constancy. The result shows significantly negative and positive long-run effects of External Debts and Foreign Direct Investment (FDI) respectively on the economic growth of Pakistan. Albeit, Consumer Price Index (CPI), Term of Trade (TOT) and, FDI significantly Granger cause economic growth in the short-run. Research suggests that economic policies devised in such a way that deteriorates External Debts and attract foreign investments and strengthen the economic growth of Pakistan in the long-term.

A simultaneous equation technique was used to investigate the relationship between capital flight (CF) and external debt (the financial revolving door theory) in Pakistan. Time series data from 1984 to 2020 are used to determine the algorithm. Using an appropriate approach, the research contributes to the measurement of capital flight from Pakistan. Three Stages Least Square is used in this study to examine institutions' relationships with capital market literature. (3SLS method). The study found that poor governance, inflation, external debt, and interest rate differentials caused CF and capital outflow by creating an unstable and unfavourable environment for savings and investment. CF causes external borrowings and world capital market borrowing. Capital retention is crucial due to this and ecological development policies. The Granger Causality Test validates Pakistan's Financial Revolving Door Hypothesis. The study concludes with policy suggestions.