The Effect of Public Debts on Economic Growth in Tanzania: An Empirical Analysis 1993 – 2023.

Bombwe, Thabit Mussa (2025) The Effect of Public Debts on Economic Growth in Tanzania: An Empirical Analysis 1993 – 2023. Masters thesis, The Open University of Tanzania.

PDF - Submitted Version Available under License Creative Commons Attribution. Download (1MB)

Abstract

This study examines the impact of public debt on economic growth in Tanzania between 1993 and 2023. Using descriptive, causal-comparative, and econometric approaches notably the Vector Auto regression (VAR) and Vector Error Correction Model (VECM) the research explores both short-run and long-run relationships between Gross Domestic Product (GDP), domestic debt, and external debt. The findings reveal a statistically significant and positive effect of domestic debt on economic growth, implying that moderate internal borrowing can stimulate economic activity when effectively managed. Conversely, external debt exerts no significant influence on GDP in the short run and a negative effect in the long run, indicating that excessive external borrowing may undermine growth through increased debt servicing burdens. The Johansen cointegration and causality tests confirm a stable long-run equilibrium among the variables, suggesting that prudent debt management is essential for sustainable growth. The results emphasize the importance of balancing domestic and external borrowing, prioritizing productive investments, and strengthening institutional debt management frameworks to sustain fiscal stability and economic progress. Keywords: Public Debt, Domestic Debt, External Debt, Economic Growth, Tanzania, VAR Model, VECM, Cointegration.

Actions (login required)

View Item