External debt and economic growth among sub-Saharan African countries, a threshold analysis

External borrowing remains one of the critical yet contentious instruments of financing growth and development in Sub-Saharan Africa (SSA), although its effect tends to be shaped by the indebtedness level, income classification, and institutional environment. This study examines the non-linear threshold relationship between external debt and economic growth among 44 SSA countries between 2005 and 2022, to determine whether debt absorption capacity (threshold level) varies systematically depending on the income and institutional quality levels. The income classification followed two groups: low-income (20 countries) and middle-income countries (24), with the full sample having 44 countries. Employing the Dynamic Panel Threshold Model, this study advances beyond the methodological limitations of static threshold models and linear estimators that dominate prior research on this subject. Three key findings are revealed. First, external debt exerts a positive growth effect below an estimated threshold of 47.23% of GDP for the full sample but turns significantly negative above this level, confirming the debt overhang hypothesis. Based on income level, the estimated threshold is 42.64% of GDP in low-income countries and 49.81% of GDP in middle-income countries, although this difference is statistically insignificant, as implied by overlapping 95% confidence intervals. This implies that debt absorption capacity is not purely income-conditioned. Second, institutional quality significantly moderates the external debt and economic growth nexus, with higher institutional levels progressively attenuating the negative growth effects of increased external debt in the SSA region. Third, accounting for institutional quality shifts the estimated external debt threshold upward by +5.94% in the full sample and +6.42% among middle-income countries and by +3.86% among low-income countries, although the change for low-income countries is insignificant. This implies that institutional quality enhances debt absorption capacity in the wholes sample and middle-income countries and not the low incomes counterparts. The study provides two policy recommendations, as follows: SSA governments should anchor borrowing below established income-group specific thresholds. Second and Policy makers should prioritizee strengthening the institutional environment by upholding the rule of law and promoting transparency and accountability, to expand the productive corridors of external debt and support sustainable growth.