The Impact of Public Debt on Economic Growth of Tanzania 1990-2017

Elikana, Frank (2019) The Impact of Public Debt on Economic Growth of Tanzania 1990-2017. Masters thesis, The Open University of Tanzania.

PDF Download (905kB)

Abstract

This study examined the Impact of Public Debts on Economic growth of Tanzania 1990 – 2017. Tanzania has used the debt in financing its budget and development projects. The public debt has been grown year in year out raising some eyebrows and hot debate on whether this growing debt helps in Economic growth or not. The study employed Descriptive Statistics, Error correction model and Johansen cointegration test to examine properties of variables. It was observed that all variables were stationary at first difference. It was also observed that all variables are integrated at order one that is to say I (1). Through OLS the variables in the model explain the economic growth by about 97%, the findings show that, the coefficient of logEDS is positive and statistically significant at 1% while the coefficient of logDSP is negative and statistically insignificant. The results show that 10% increase in debt service slow down the economy by 10.3%. Moreover, the results from the Cointegration test reveals the existence of long run relationship between economic growth and external debt. These findings align with the results from the Error Correction Model which show that the coefficient of external debt is positive and statistically significant while the coefficient of debt service payment is also positive but not statistically significant. These findings may indicate that Public debt contribute positively to Economic growth while its servicing is impacting negatively the Economic Growth of Tanzania. Hence it is very important for government to reduce the amount of funds obtained through debts in order to reduce the burden of servicing it.

Actions (login required)

View Item