Economic Growth, External Debt and Corruption Nexus in Sub-Saharan African Countries: Moderation Modeling
DOI:
https://doi.org/10.53819/81018102t2337Abstract
This study aligns with Sustainable Development Goal 8, which borders on “economic growth by ensuring external debt is invested well in development projects that can spur economic growth”. It contributes to the economic growth literature by evaluating the role of external debt and corruption on economic growth. The Sub-Saharan African region has witnessed an increase in external debt. However, the economic growth has been reducing. The region witnessed a contraction in economic growth to 2.7 percent in 2022 down from 4.4 percent of 2021. The literature indicates that corruption can impede external debt from achieving the intended purposes. Many studies have revealed the role of external debt in economic growth but have not studied the moderating effect of corruption thus creating a gap for this study. To achieve the objective, the study uses the Fixed Effects Panel data approach on unbalanced panel data on 46 sub-Saharan African countries from 1998 to 2021 to interrogate the nexus. The results revealed a positive relationship between external debt and economic growth. However, corruption was found to reduce the effectiveness of external debt in realizing economic growth. The study therefore recommends that governments of the countries in the region need to address corruption so to achieve the desired economic growth. They should implement measures focusing on improving institutions quality to control financial corruption. In addition, the policy makers should relook at increasing anti-corruption initiatives aimed at reducing poor governance for instance financing anti-corruption agencies to ensure corruption is reduced.
Key Words: Economic growth, External Debt, Corruption
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