Do External Debt and Debt Servicing Influence Economic Growth? Evidence From Selected Sub-Saharan African Countries

Abstract

This study investigates the effect of external debt and debt servicing on economic growth in selected Sub Saharan African countries using the Cross Sectionally Augmented Autoregressive Distributed Lag (CS ARDL) model, appropriate due to the mixed order of integration and evidence of cross-sectional dependence in the data. The baseline CS ARDL results show that in the short run, external debt (β = -0.0216, p = 0.158) and debt servicing (β = -0.0302, p = 0.765) are negative but statistically insignificant, while institutional quality is weakly significant and negative (β = -3.0381, p = 0.076) and real interest rate is positive and significant (β = 0.0447, p = 0.034). In the long run, only lagged GDP is statistically significant (β = 1.1305, p = 0.000), while external debt, debt servicing, institutional quality, and other control variables remain insignificant, indicating strong growth persistence and limited direct influence of debt variables on economic performance. The robustness checks using fixed effects and Driscoll and Kraay standard errors confirm these findings. External debt remains positive but statistically insignificant, while debt servicing is negative and insignificant across both estimators. Institutional quality is also insignificant in its direct effect; however, the interaction between external debt and institutional quality is positive and statistically significant, indicating that the growth impact of external borrowing depends on institutional strength. Real interest rate and exchange rate remain consistently negative and statistically significant, reinforcing the role of macroeconomic instability in constraining growth. The study concludes that external debt and debt servicing do not exert a direct significant influence on economic growth in Sub Saharan Africa. Instead, their effectiveness is conditional on institutional quality, while macroeconomic stability and structural persistence play more dominant roles in determining growth outcomes. It is recommended that governments strengthen institutional quality, improve debt management frameworks, and ensure that borrowed funds are directed toward productive investments capable of generating sustainable long-term growth.