External Debt and Economic Growth in Sub-Saharan Africa

External Debt and Economic Growth in Sub-Saharan Africa

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The effect of external debt on economic growth has been among the contentious issues. Based on panel data for 44 Sub-Saharan African countries for a period of over 30 years, this book reveals that external debt stock and debt services are found to have a statistically significant negative impact on economic growth especially at higher debt levels of debt/GDP ratio. The growth maximizing level of debt stock ranges from 25% to 45% of GDP. Furthermore, external debt affected growth by adversely affecting human capital formation. Debt service payments are also found to have the "crowding out" effects on private investment. The implication of these findings is that countries in Africa should align their public policies towards maintaining a sustainable level of indebtedness, improve the quality of their man power, enhance good governance and control corruption. In addition to the provision of new loans, developed countries and multilateral institutions should foster development cooperation...

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