External Debt and Economic Growth: An Impact Analysis

Manasseh, Charles O.; Abada, Felicia C.; Ogbuabor, Jonathan E.; Egele, Aja Ebeke; Urama, Chinasa E.; Okoro, Okoro E.U.; Onwumere, Josaphat Uchechukwu Joe

doi:10.36478/sscience.2019.55.67

Cited by 2 publications

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“…Fig 1 gives a clear picture of external debt in Sub-Saharan Africa in comparison to the rest of the world. The figure shows that external debt in Sub-Saharan Africa was the highest in the world between the years 1993 to 2004 which supports the conclusion of the study by [ 30 , 31 ] that external debt had a negative effect on economic growth.…”

Section: External Debt Profile In Sub-saharan Africasupporting

confidence: 85%

“…Again, the findings suggest that economies with vulnerability in their capital accounts could experience crisis especially if external funds are not properly utilized. Thus, a sound analysis of the economic and social profitability of all debt-financed projects is important before to ensure that the returns generated will be in excess of the interest and capital repayments before acquiring such loans [ 31 ]. African countries should ensure that the quality of governance can support the effective and efficient allocation of all external debts for the purpose of promoting growth in their various countries.…”

Section: Conclusion Policy Implications and Recommendationsmentioning

confidence: 99%

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External debt and economic growth in Sub-Saharan Africa: Does governance matter?

et al. 2022

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This study empirically examined the impact of external debt on economic growth. Also, the interactions of governance, external debt and external debt volatility were further investigated with emphasize on the interective effect of governance as proxied by Kaufmann, D., (2007) quality governance measures such as; government effectiveness, political stability, voice and accountability, regulatory quality and corruption control on economic growth. The study utilized annual time series data, focusing on thirty selected Sub-Saharan African (SSA) countries for the period 1997 to 2020. The Dynamic System Generalised Method of Moments estimation technique was adopted while controlling for conventional sources of economic growth. Empirical findings from the study reveal that external debt and external debt volatility have a negative and significant impact on economic growth in SSA. Furthermore, the interaction of governance indicators, external debt and its volatility, had a positive impact on economic growth in SSA. This study recommends that SSA government should endeavor to avoid excessive external debt to promote the regions’ capacity to invest in her financial prospects, and to circumvent the danger of repayment of loans using her small income. The SSA governments should also improve the quality of governance by ensuring political stability, minimising corruption, implementing sound policies and regulations that can permit and promote economic growth through the development of the private sector. The governments must ensure that every borrowed debt is properly supervised and utilised for its purposes to spur economic growth. More so, the Guidotti-Greenspan rule of Reserve adequacy should be applied to keep excess borrowings in check.

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Section: External Debt Profile In Sub-saharan Africasupporting

confidence: 85%

Section: Conclusion Policy Implications and Recommendationsmentioning

confidence: 99%