Public Debt, Debt Servicing and Economic Growth

Purpose: This paper aims to investigate the relationship between Ghana's external debt level, debt servicing, and economic growth, considering the context of Sub-Saharan Africa's ongoing struggle with managing substantial external debt. Additionally, the effects of the Structural Adjustment/Economic Recovery Program (SAP/ERP) of 1983 on economic growth are examined. Design/Methodology/Approach: The study utilizes time series data from 1975 to 2021 to analyze Ghana's external debt dynamics and its impact on economic growth. The research employs the Augmented Dickey-Fuller test, PP test, and Autoregressive Distributed Lag (ARDL) regression method for analysis. Findings: The findings reveal a weak negative association between Ghana's external debt stock to GDP ratio and savings as a percentage of GDP, alongside GDP per capita. Furthermore, the study identifies a positive yet statistically insignificant relationship between debt service and economic growth. Additionally, the model illustrates the substantial effects of the SAP/ERP of 1983 on the country's economic performance. Originality: This study adds empirical evidence on the link between external debt, debt servicing, and economic growth in Ghana, focusing on the SAP/ERP context. Using robust statistical methods and a comprehensive time series dataset, it sheds light on managing external debt in low-income countries, enhancing understanding of economic challenges in Sub-Saharan Africa.