The impact of foreign capital on human development has been at best ambiguous, while that of institutions is undoubtedly favorable. That said, the way foreign capital relates to human development may be affected by the quality of institutions. This paper assesses this very phenomenon in 65 developing countries over the time period 1984-2014. In this regard, this study incorporates three indicators of human development namely, per capita income (PCI), Secondary School Enrollment (SSE) and Life Expectancy (LE). Using two step system GMM estimation technique, we found that the impact of foreign capital varies with respect to the indicators of human development and the type of foreign capital being studied. Both FDI and FPI negatively affect per capita income and secondary school enrollment, while, remittances affect all the indicators of human development positively, except for life expectancy. The interaction between institutions and each type of foreign capital flow exerts a positive influence on all indicators of human development. However, this positive interaction fails to completely eliminate the adverse influence of the capital flows, which reflects inadequacy of existing institutional quality in developing countries and the need for institutional reforms.

Since the advent of Neolibralism, debt has been construed as means of policy reforms to achieve stability, liberalisation and recovery from shocks. However, the other side of the picture has been either ignored or underappreciated. That is the human cost of indebtedness. Whether internal or external, indebtedness may have significant implications for the living conditions of the masses, as it leads to substantial deviation of resources towards debt management. This paper attempts to assess the impact of indebtedness on poverty for Pakistan. The impact of total, internal and external debt on poverty has been evaluated separately. Using the data from 1973 to 2013, Johansen Co-nintegration test reveals long run relationship between debt and poverty. The results remain consistent when domestic and external debt is taken separately. The long run impact of total, internal and external debt on poverty is positive. Which means that for Pakistan debt leads to increase in poverty. Further, it is evident that domestic debt has more severe poverty implications as compared to external debt. These results have two important policy implications; firstly, the overall levels of debt have to be reduced and secondly, the issue of domestic debt reduction takes priority. JEL Classification: I30, I38, F34, H36 Keywords: External Debt, Domestic Debt, Poverty, Johanson Cointegration