Does External Debts Promote Sustainable Economic Development in Developing Countries?

Abstract

External debts is one of the major sources of revenue to developing nations that normally do not have an enough industrial support and is illustrated by a small human development index. The aim of this paper is to test whether external debts promote sustainable economic development in developing countries or not. The study opted a time series data research design where by secondary data were used. This study used economic data from 1999-2020 financial years (Quarterly data). The study involved 80 observations. Kenya was purposively sampled to be used as research area of this study. The data collected from different reliable sources which included the International Financial Statistics (IFS), World Bank's Statistical Database, The Treasury of Kenya, Ministry of Devolution and Planning and the Kenya National Bureau of Statistics. The results of the study revealed that there is longterm associations between external debts and sustainable economic development with P-Value of 0.0001. Another finding revealed that there is statistical significantly in all other macroeconomic variables in the predictable direction with P-Value of 0.0011, except broad inflation and money that have vague signs. In short-run revealed that external debts affect statistically significance economic development with a negative direction P-Value of 0.0064. The study recommends that the government should think about adopting other sources of finance articulate via taxation and reduce borrowing outside to minimize assistance from developed nations. The government should also assign extra resources to savings in human capital education as efficiently labor has the effect of promoting sustainable economic development crosswise all models in the short run. Particularly population expansion rate should be proscribed through increasing utilize of social services such as family planning or sensitization to reduce support pressure on imperfect resources which deject economic development.