The Impact of foreign debt on economic growth in Sub - Saharan Africa

Abstract

This research carries out an empirical research on the impact of foreign debt on the economic growth of sub-Saharan Africa countries using cross sectional regression method suggested by Sala i-Martin and Robert Barrow. The study also incorporates the Solow growth model. Tests for both debt overhang and crowding out effect are conducted on ten Sub Saharan African countries over the period of 1980-2010. The findings show that, although there is no significant evidence of debt overhang effect, a negative impact of foreign debt through the crowding out effect is severely setting back economic growth in Sub Saharan Africa.