An Investigation Of The Impact Of External Debt And Monetary Policy On Economic Growth In Some Selected African Countries
Ali Salisu
Bayero University Kano Faculty of Economics and Management Sciences
Adahama Ibrahim Haladu
Capital City University Kano Department of Economics
Mu’azu Yunusa Riruwai
Finance Department Organization Bayero University Kano
Keywords: External Debt, Monetary policy, Economic growth
Abstract
External debt is an important source of finance mainly used to supplement the domestic sources of funds for supporting development and other needs of a country. The study analyses the impact of external debt and monetary policy on economic growth in some selected African Countries such as Chad, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Malawai, Nigeria, Republic of Cango, Rwanda, Senegal, Tanzania, Zambia and Zimbabwe from 2014 to 2023. The panel unit root test indicates that real gross domestic product, money supply, interest rate, exchange rate and external debt servicing are integrated of order one while external debt is integrated of order zero. The Generalized Method of Moment (GMM) result shows that Money supply has a positive and statistically significant effects on the real gross domestic product in the selected African countries. exchange rate has a positive and statistically insignificant effects on the real gross domestic product in the selected African countries. Interest rate has a negative and statistically insignificant effects on the real gross domestic product in the selected African countries. External debt has a positive and statistically insignificant effects on the real gross domestic product in the selected African countries. External debt servicing has a positive and statistically significant effects on the real gross domestic product in the selected African countries. Therefore, the current study concludes that monetary policy and external debt have positive effect on economic growth in the Selected West African Countries, namely Chad, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Malawai, Nigeria, Republic of Cango, Rwanda, Senegal, Tanzania, Zambia and Zimbabwe. The study recommends that African Countries especially namely Chad, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Malawai, Nigeria, Republic of Cango, Rwanda, Senegal, Tanzania, Zambia and Zimbabwe should ensure that monetary authorities across these nations adopt expansionary monetary policies that sustainably increase the money supply to stimulate economic growth. Central banks should prioritize the efficient management of money supply to enhance liquidity and support productive investments. African countries should ensure that external borrowing is strategically targeted toward infrastructure, human capital development, and other productive sectors. Transparent and accountable debt management frameworks are essential to maximize the growth benefits of external borrowing.