External Debt and Economic Growth in Sub-Saharan Africa: The Role of Country-Level Governance Structures

ABSTRACT

Sub-Saharan African countries have experienced a decline in its economic growth rate due to delayed and still limited policy adjustments in the region, with a consequent rise in public debt and deteriorating international reserves. External debt and governance have been argued to impact a country’s economic growth. The study assessed the role of country-level governance structures in the relationship between external debt and economic growth using a panel of 38 Sub-Saharan African countries for the period 1996-2016. The study used Arrelano and Bond General Method of Moment dynamic panel estimation technique. The results indicate that country-level governance structures improve the utilization of external debt to boost economic growth in Sub-Saharan African countries. The study concludes that strong country-level governance structures (rule of law, voice and accountability, political stability and absence of violence/terrorism, regulatory quality, government effectiveness and control of corruption) would ensure efficient utilization of external debt for the purpose of increasing economic growth in Sub-Saharan African countries