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This research endeavors to unravel the complex interplay between external debt dynamics and economic growth. External debt is necessary for countries to finance investments in infrastructure, human capital, technology, economic growth, and address balance of payments. It plays a pivotal role in supporting development initiatives and crisis management. The study took 41 diverse countries within the International Monetary Fund (IMF) framework from 2005 to 2021. Employing a meticulously curated dataset encompassing various economic indicators GDP growth, external debt, government consumption, inflation, and imports this study applies System Generalized Method of Moments (GMM) and Difference GMM approach. High external debt is linked to lower GDP growth, indicating negative correlation. The study highlights the impact of government consumption, inflation, and imports on GDP growth, with varying effects based on analytical methods. Evidence-based recommendations include prudent debt management, efficient government spending, and trade-friendly policies for sustainable economic expansion.
Azra et al. (Wed,) studied this question.