Growing external debt and declining export: The concurrent impediments in economic growth of Sub-Saharan African countries

This study investigates the impact of external debt and export on economic growth of Sub-Saharan African countries, using ARDL panel model and appropriate estimation techniques. The estimation results reveal insignificant positive impact of both external debt and export on economic growth, in the short run. The impact turns negative in the long run, with export exerting a more significant adverse impact than external debt. However, there is long-run convergence among the variables. Furthermore, the estimated model exhibits significant structural stability, hence the estimation results are reliable for purpose of policy making. In the light of these findings, some policy options may be considered. These policy options include the curtailing of external borrowing until current debt stocks are repaid, ensuring external loans are tied to specific projects to avoid inefficient allocation of the funds, exploring domestic capital market for funds as alternative to external borrowing, embarking on more export diversification in order to mitigate poor performance of primary commodity exports, and establishment of commodity exchanges that would attract more foreign buyers of export products. These policy options can help to stem growing external debt and declining export, and subsequently ameliorate the unfavorable effect on economic growth in the countries.