Effect of External Debt on Economic Growth of Tanzania:(1990 - 2023).

Shaltiel,, Seth Duguda (2025) Effect of External Debt on Economic Growth of Tanzania:(1990 - 2023). Masters thesis, The Open University of Tanzania.

PDF - Submitted Version Available under License Creative Commons Attribution. Download (904kB)

Abstract

This study examined the effect of external debt on economic growth of Tanzania using Autoregressive Distributive Lag (ARDL - Model) for the time series data from 1990 to 2023 collected from the WB database, guided by the debt overhang theory and Keynesian theory of aggregate demand. Gross Domestic Product (GDP) was used as a dependent variable, while External Debt Stock (EDST), External Debt Service (EDSV) and Foreign Direct Investment Inflows (FDI) were used as independent variables. The ARDL findings revealed that in the short run, both External Debt Stock (EDST) and Foreign Direct Investment Inflows (FDI) positively but statistically insignificant affects Economic Growth (GDP). On the other hand, External Debt Service (EDSV) was found to negatively but statistically insignificant affects GDP. In addition, the bounds cointegration test found no long-term equilibrium relationships exist between external debt (ED) and economic growth of Tanzania (GDP). The study concludes that the effect of external debt (ED) on economic growth (GDP) of Tanzania is not harmful, despite the lack clear and strong evidence of its economic benefits. However, from the negative and statistically insignificant of the first lag of external debt stock (EDST) with p-value 0.105 at 95% confidence interval, the study recommends that the government of Tanzania, through its policymakers should pay close attention to the issue of excessive external debt accumulation by limiting external borrowing to avoid the economy falling into debt overhang problem. Keywords: Economic Growth, External Debt Stock, External Debt Service, Foreign Direct Investment inflows

Actions (login required)

View Item