External Debt and Low-Income Countries 1

EXTERNAL DEBT AND LOW-INCOME COUNTRIES

The Impact of External Debt Servicing on the Growth of Low-Income Countries

Muzna Gohar, Niaz Ahmed Bhutto, Falahuddin Butt

Sukkur Institute of Business Administration, Sukkur

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 2

Abstract

Since 1990s, the mounting debts and debt service payments of the low income countries

are gaining due concentration and attention from the policy makers and economists. This

study was also carried out to review and analyze the impact of external debt servicing on

the growth and development of low income countries. To hunt the objective of research,

six variables i.e. growth, external debt servicing, interest rates, savings, net exports,

Foreign Direct Investment were taken to determine their statistic relationship with the

GDP or growth of the country. Annual panel data was taken from 1990 to 2008 of thirty

six low income countries and was manipulated through least square multiple regression

method. External debt servicing, FDI2, FDI and Net exports were statistically significant

and the first two showed the positive impact on growth and later two showed the

negative. Therefore, it was concluded that low income countries should go for the option

of debt forgiveness and must invite FDI but not much as their over crowding may hurt the

economy. Exports are good to boost the economy so they must be lifted up. The impact

of external debt servicing is quite adverse on growth so steps must be taken to erase it in

order to grow well.

Keywords: External debt servicing, GDP growth & Debt management.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 3

1. Introduction

Economists always sought out to find the ways through which a country can achieve

long-lasting sustainable economic growth. The repayment of debt in the form of principal

and interest payments which is cumulatively known as “debt service payments” is

identified to be a serious threat to economic growth of any country, by keeping all other

factors constant. Countries take debt from the external sources for many reasons i.e. their

income is low, they are having budget deficit or they are having low investments in their

country on conditions to repay them with certain obligations. This repayment or “debt

servicing” creates problems for many countries especially for low income countries

because a debt has to be serviced more than the actual amount it was taken for. Large

debt service payments impose a number of constraints on a country’s growth scenario. It

drains out countries’ limited resources and restricts financial resources for domestic need

of development

Low-income countries frequently keep on taking debts because they are in the phase of

development and need extreme support in this regard. Benedict Clements (et al, 2003)

suggested that foreign borrowing has a positive impact on investment and growth of a

country up to a threshold level but external debt service can potentially affect the growth

as most of the funds will go in the repayment of the debt rather in the investments.

External debt servicing creates a crowding out effect because of the high real interest

rates, terms of trade of over borrowed country’s worsen, and tax rates increases, returns

on the investment declines thus creating a downward pressure on the investments in the

country.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 4

Public expenditures are important determinants of the economic growth and government

spends dominantly in education and health sector but debt servicing can damage such

constructive fiscal allocation greatly in the low-income countries. Imran Sharif (et al,

2009) analyzed the impact of foreign debt and foreign debt servicing on the savings and

investment expenditure of Pakistan and suggested that foreign debt servicing has a

negative impact on the constructive activities which can increase the economic growth of

Pakistan. Another case is of Nigeria, where in 2000 US $1.9 billion was used for debt

servicing which was four times greater than what Federal Government budgeted for

education and twelve times greater than what was allocated for health whereas in 2001

debt service payments were US $2.13 which was six times greater than education

expenditure and seventeen times greater than health expenditure. Also, Augustin Kwasi

(2009) studied the impact of external debt service payments on public expenditure

composition in Sub-Saharan Africa and found out that debt servicing shifts spending

away from social sector, health and education.

This shows that the actual aim behind taking debt which is to seek development is being

depressed by debt service payments because it is eating up most of the resources rather

than development. It will reduce the enrollment levels; slow down growth in health thus

reducing human capital and slow human capital growth have an indirect negative effect

on growth as it reduces the productivity of new investment.

Another problem which rises as a virtue of debt servicing is the problem of “debt

overhang” which increase the amount of repayments by the virtue of the difference in the

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 5

actual and contractual value of repayments, thus ultimately increasing the debt servicing

burden of a country. [Link] (et al, 2001) concluded in their paper that when the

situation of debt hang rise i.e. when the expected repayment falls undersized of the

contractual size of the repayment then debt service increases on country’s output level

which serves as strainer of fiscal resources of the country.

There are different indicators of debt service burden such as;

I) Debt servicing as percentage of export receipts measures the ability of debt

repayment and creditworthiness of a country. According to the World Bank,

when debt servicing of a country go beyond 20 percent of its export earnings

then its debt becomes unsustainable.

II) Debt servicing as a percentage of foreign exchange earnings is another

important indicator of indebtness of a country.

III) The most important indicator determining long-run results is the ratio of debt

service to GDP which determines the burden of debt service burden on the

country’s income. As this ratio goes up so does increases the burden. As a

research by Chris Nagassam (1992) employed a logit model and indicated that

higher the debt service ratio will be, the lower the GDP will be and it will

develop constraint for external debt servicing capacity of African Nations.

There are many disadvantages of debt servicing but some researches have shown that

debt service payments can have positive impact on the economic growth as well. This can

be because of the good terms of relationship with the creditors or the negotiations or

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 6

relief in terms of repayments or extensions of the dates of repayments. As Geske and

Neils (2001) suggests in their paper reduction in debt service as a result of forgiveness or

relief works very well for Latin America due to investments and public expenditures

increase which have a positive impact on the growth of the country. George Ndoh

Mbanga (1990) worked on the hypothesis to test whether debt and debt service reductions

can improve the growth of poor countries such as Cameroon and found a positive

relationship between debt, debt service reduction and aggregate demand. Another study

by Janice Abilene (et al, 2005) focused on the relationship between the external debt

service payments and economic growth of Philippines using the Vector Auto Regressive

Model and drew that economic growth is not very much affected by external debt

servicing.

For this reason, many low-income countries strive to get some relief in terms of debt

service payments which helps them to heal their injurious economy. Another remedy was

found by Mansoob Murshed (2010) as he analyzed the short run and long run effects of

trade policy in the presence of debt servicing and found out that strong trade policy can

decrease the negative effect of debt servicing with the help of voluntary export restraint.

Martin Feldstein (1986) stated that if the countries can limit the ratio of debt service

payments to GNP either by negotiations or agreements then they can achieve economic

growth.

Some economists as Jean Baneth (2003) stated in his paper that debt service is not such a

big problem as it is being made. The problem rises from the improper utilization of the

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 7

debt. If the debt will be properly utilized then it will help a country to generate revenue

and repay its debt properly. Debt servicing becomes unsustainable because of the other

domestic problems and policy inconsistency.

There have been very less studies and researches done to determine the effect of debt

service payments on the growth of low-income countries. Thus, keeping in consideration

all above stated facts and findings of other economists, a research will be carried out on

all low-income countries to see that whether their growth is being affected by external

debt servicing or not.

Next part of the article will comprise of the literature review, data and methodology and

conclusion.

2. Literature Review

A number of studies have been done by many economists and researchers to examine that

either debt servicing affect growth of a country or not, by applying different techniques

and methodologies. Mixed results have been drawn i.e. some studies suggested that debt

servicing affect the growth of a country significantly while others have failed to draw the

same result. Different variables were examined by applying different methods in order to

draw the results. Feder and Just (1977) investigated the relationship between six

economic variables which were debt service ratio, imports/reserves, amortization, income

per capita capital inflows and growth of the country using logit analysis model and

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 8

concluded that there is significant relationship between these variables. W.A Adesola

(2009) examined the effect of external debt service payments on the economic growth of

Nigeria and used ordinary least square multiple regression method for his analysis. It was

found out that debt service payments have negative impact on GNP and Gross Fixed

Capital Formation (GFCF). Many other explorers came to the same kind of results. Abid,

Hammad and [Link] (2003) examined the dynamic effect of GDP, debt service, capital

stock and labor force on economic growth of the Pakistan and their results showed that

debt servicing burden has a negative effect on the productivity of the labor and capital

and thus, affects economic growth inadequately.

Erdal Karagol (2003) used multivariate co integration technique to develop a vector error

correction model to investigate the long run effects of external debt service on GNP level

of Turkey and found out a uni-directional negative relationship between the two

variables. Jaffrey D. Sachs (1990) claimed that the burden of debt service payments

threatens the economic growth of HIPCs and is an important reason of the repeated

failure of structural adjustments programmes to boost the economic growth of many of

them. [Link] (2008) stated that high debt service payments brings low- growth

environment in a country. Christopher and Alexandra (2003) researched that large debt

service payments greatly affects the income of highly indebted primary producing

countries and they find it difficult to repay their debts. John and Samy (2003) found out

that debt service burden can depress growth by crowding out investment, import

compression and ultimately declining growth. James Akperan (2005) found out that ever

increasing debt and debt service payments have a significant negative effect on economic

output of Nigeria and the country needs proper debt management for the growth.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 9

On the whole, there are bundle of time series researches available on the subject under

discussion constituting many variables and methods in them but major drawing the

conclusions that external debt servicing affects the growth badly in many ways such as by

affecting per-capita income level, GDP growth rate, trade openness, foreign currency

reserves and capital inflows, by rising crowding effect and debt over hang problem as

found out by Menbere Workieh Tirunieh (2005), E. Kohlscheen (2004), Owino Paul

(2005) generally and by J.M Frimpong (et al,2006) in case of Ghana, Medani Mohammad

(2008) in case of Sudan, Janice Abilene (et al, 2007) for Philippines, Rehana and Afia

(2001) for Pakistan, Barbara Mbire (1997) for Uganda, Melese Gizaw Desta (2005) for

Ethiopia, Isa Audu (2004) for Nigeria and Erdal Karagol (2004) for Turkey.

Many researchers considered the uncertainty regarding the debt service payments in order

to judge its impact on the growth. Geske and Niels (2001) investigated that whether and

up to what extent; the uncertainty with respect to annual debt service payments can

adversely affect the economic growth of Highly Indebted Poor Countries and found

supportive results in this regard and concluded that debt relief helps in recapturing

growth, by reducing the debt service payment uncertainty. Augustin Kwasin (2009)

searched for the effects of external debt servicing constraints and public expenditure

composition in sub-saharan Africa and found out that constraining debt servicing shifts

spending away from the social sector, having adverse impacts on health and education by

employing Unrelated Regression.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 10

On the other hand, [Link], Hafeez, Jamshed (2008) sought out the causal relationship

between exports, economic growth and debt servicing of Pakistan and found out through

Toda-Yamamoto Granger Causality Test that there is trivariate causality between these

three variables and debt service payments cause the increase in GDP of Pakistan.

Similarly, Albert (et al, 2008) found out that debt service payments do not exert negative

impact either in the long run or in the short run in the case of Sri Lanka by employing

Engle and Granger technique. Etazaz Ahmad (2004) drew the results that growth of GDP

does not appear to have significant relationships with debt-service ratios of Pakistan. This

can be mainly because of the soft terms of borrowing and rapid negotiations.

Those researchers who worked on the debt service payment reductions or delays or

deferrals also came across with different results depending upon the economic conditions

of the countries under examination. Benedict (et al, 2003) found out that reductions in

external debt service payments can provide an indirect boost to economic growth through

its effect on public investment. Michael and Lars (1994) searched on the suspension of

external debt service payments to external creditors and found that it does not allow a

debtor country to get out of low growth rather it increases its external debt burden. Milton

[Link] (1999) suggested that forgiveness in mounting debt service payments is needed

for Sub- Saharan Africa as it will stimulate the investment recovery and economic

growth. Christopher and Alexandera (2005) used Monte Carlo simulations and suggested

that if flexibility can be introduced in debt servicing on the basis of fluctuations of

borrower’s terms of trade then it proves to be feasible for the indebted countries because

debt service payments have negative impact on the economic growth. Ayse and Tugrul

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 11

(1988) worked on the debt servicing capacity of the developing countries and his study

was mainly confined for Turkey and he found out that when debt service payments of

Turkey were rescheduled then it grew in its relief years. Thus, debt service rescheduling

also plays an important role in growth.

2.1 RESEARCH HYPOTHESIS

Following is the hypothesis that will be tested through this study;

Ho = There is no impact of external debt servicing on the economic growth of low income

countries.

Ha = There is an impact of external debt servicing on the economic growth of low income

countries.

3. RESEARCH METHODOLOGY

3.1 Sources of Data

The data for this study has been taken from a secondary resource “world data bank”

Annual data of thirty six low income countries, the names of which are available in the

appendix attached in the end, has been used for this study starting from the year 1990 and

ending on 2008 which means that the research depends upon panel data and its

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 12

methodologies. Six important variables were examined to derive a model in order to

study the impact of external debt servicing on the growth of low income countries which

are discussed as under;

3.2 Model Specification

The model built to test the hypothesis of the study is as following;

Yit = βo + β1 ln (DSEit) + β2FDIit + β3FDIit2 + β4ln (ADSit) + β5Xit + β6 Rit + µit

3.3 Variables

βo, β1, β2, β3, β4, β5 and β6 are the coefficients of each variable or parameters of the

regression whereas µt represents the error term. The variables used to build the study are

as follows;

1. Y = GDP growth (annual %).

2. DSE = Debt servicing on external debt (total, US $).

3. FDI = Foreign Direct Investment (net inflows, current $).

4. X = Exports of goods and services (current US $).

5. ADS = Adjusted Savings, net national savings (% of GNI).

6. R = Real interest rate (%).

Where debt servicing on external debt is the main variable and others are used as

controlled variables.

4. Results

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 13

Variable (a) (b) (c)

Constant 15.90922 17.02324 16.08824

(3.696446)** (4.014075)** (2.601775)**

-0.676602 -.763321 -0.756178

LOG(DSE) (-2.784429)** (-3.174545) (-2.174909)**

-5.59E-18 -5.36E-18

FDI^2 (-2.705591) (-2.209638)**

1.88E-09 9.09E-09 8.44E-09

FDI (1.482203) (3.090773)** (2.260347)*

7.83E-10 7.56E-10 9.11E-10

X (5.301611)** (5.203248)** (5.274767)**

-0.479534 -0.429106 -0.240874

LOG(ADS) (-1.425510) (-1.298638)* (-0.595076)*

0.029305

R (0.633464)

R-squared 0.192457 0.228124 0.330622

Adjusted 0.172142 0.203791 0.288346

R-squared

Durban Watson 1.873330 1.98710 1.723825

Stat

F-statistics 9.473394 9.344012 7.820477

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 14

Note: The t-statistics is given in parenthesis. Individual coefficients

are statistically significant at *5% level or **1% level.

These three models were run to reach to the accurate results. In the first model, interest

rate is not included in judging the impact of debt servicing on the growth. The

coefficients of only LOG (DSE) and X are statistically significant at 5% but of FDI and

LOG (ADS) are not. R2 of this model is 0.1924 which is very low, showing that the

included variables are responsible for the 19.24% of the results while the remaining

80.76% will be described by omitted variables, which is quite a big number. Hence there

is a possibility that other techniques can be applied to reach towards the more accurate

and significant results. For this reason, model (a) has been rejected.

In model (b), the variables are re-examined, again not by including interest rate variable

but by adding FDI2 in the equation. This addition increased the R2 up to 22.814% which

is better than the former one but still it is leaving a large proportion of 77.186% to be

defined by omitted variables. The big flaw in this model, which made it rejected, is the

insignificance of the main variable LOG (DSE) that is the external debt servicing. The

main focus of this article is to find the effect of external debt servicing on the growth.

When the concerned variable will be insignificant then we will not be able to reach up to

the realistic results. That is why this model was not further used.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 15

The model (c) drew improved results in comparison with the rejected models. It included

all of the variables to derive the equation. LOG (DSE), FDI2 and X are statistically

significant at 1% level while LOG (ADS) and FDI are significant at 5% level. Only

interest rate is not significant which means that it will not be included to define the

results. R2 is 33.062% which is higher than all. Thus, this model is followed for deriving

the results of the research.

Based on the results of model (c), the following equation is formed;

Y = 16.088 –0.756 log (DSE) +8.44 FDI –5.37 FDI2 –0.241 ln (ADS) +9.11 X +0.029 R

(6.183) (0.347) (3.73) (2.42) (.404) (1.72) (.046)

Where in the brackets are the standard deviations of each coefficient respectively.

4.1 Research Hypothesis Result

The decision to be taken regarding the research hypothesis stated above depends upon the

following rule;

If the calculated value of F-statistics ≤ the tabulated value of F-statistics, then we will fail

to reject Ho. Other wise, we will reject Ho.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 16

According to the model, the calculated value of F-statistics is 7.82 and tabulated F-

statistics is F (5, 30) which is equal to 1.70 at 1% level of significance.

Hence, 7.82 > 1.70 which means that we will reject null hypothesis and will accept

alternative hypothesis which shows that there is an impact of debt servicing on the

growth of low income countries.

5. Discussion of the Findings

A general analysis suggests that external debt servicing has no direct impact on the

growth itself rather it effect the other important factor which is directly responsible for

growth and that is public investment. Model is showing negative sign with external debt

servicing which is mainly due to the transfer of resources in the payment of debt than on

the investments. The more the external debt payments will be, the lesser will be funds

raised for public services such as the construction of roads, hospitals, schools and new

business opportunities. Another main point to be considered is that debt stocks are not as

costly as the charges related with them are. A research drew the results that when external

debt a threshold level which is estimated to 50% then the economic growth starts slowing

down as the interest rate payments mountain up. The relationship of external debt

servicing and public investment is found to be non-linear and the driver of crowding out

effect as more funds will be demanded by the government to finance the debt, interest

rates increase and individuals will be discouraged to borrow and invest. Also, the

problem of debt overhang rises due to which a country fails to acquire more debt for the

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 17

investment as its existing debts carry more cost with them than that of the new payoffs. In

this manner, model verifies the negative effect of external debt servicing on growth.

Many studies and research works have concluded the impact of Foreign Direct

Investment (FDI) to be progressive over the economy which is true as this concept is

again being supported by the above driven model which is showing the positive impact of

FDI on growth. FDI is good for low-income countries because it brings with it funds and

other more benefits in the host countries. FDI provides capital for the investment due to

which a lot of new job opportunities take place. It brings new technologies, improved

business structures and new managerial skills in which low income countries lack and

help in making their contacts better with the foreign markets and shaping up their

economic structure. Other benefits include increased wage rates and positive impact on

balance of trade due to foreign inflows. On the other hand, there is negative impact of

FDI as well if it starts growing up to higher levels as shown by the model. FDI2 has a

negative sign with it showing that FDIs after certain threshold level are treacherous for

economic growth. Its reasons include the efforts of local companies of saving themselves

from the local taxes by showing losses on their income statements by repatriating their

profits which means that foreign companies shift their profits towards their country of

origin. Also, they seek provisions due to which they pay little or no taxes and thus, are

not beneficial for the governments. Next, their purchases of supplies increase the imports

which damage the balance of payments and a gap arises between the developed foreign

and under developed domestic sectors.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 18

Net exports denoted as X, has positive impact on the growth of a country as the positive

sign shows in the model. The more the exports will be done, the more the foreign

exchange will be earned which will be invested in the country, revenues will be generated

and funds will be gained to service the debt.

There is a very strange result shown by the model and that is the negative sign associated

with adjusted savings which is showing the negative impact of savings on the growth in

the presence of external debt servicing. The main reason behind this effect can be that

when interest rates get high due to the more demand of money by the Government to

service debt, people prefer to save more to earn high interest rates rather than investing.

Thus, their attitude of avoiding the investment in order to earn high interest rate

proportions on the money does not bring growth. Thus, due to high debt servicing,

savings will be having negative impact on growth of the country.

One variable, interest rate is insignificant which will not be included to determine the

results.

On the whole, it has been proven that the external debt servicing has a negative impact on

the growth of low income countries in the presence of FDI and adjusted savings,

affecting many macroeconomic factors.

6. Conclusion and Suggestions

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 19

The main theme of this article was to study the impact of external debt servicing on the

growth of low income countries. By going through a lot of former research works and

articles and by manipulating the collected data and examining the model found after

different tests, it has been concluded that external debt servicing has a negative impact on

the growth of country due to its outrageous effects on the macroeconomic factors

responsible for the growth. External debt servicing offsets the investments by creating a

crowding out effect and debt overhang problem. FDI helps a lot in bringing in the foreign

exchange and investments and employment and technological and business structure in

the country but this effect gets neglected due to too much foreign direct investment and

their efforts of saving from taxes and sharing profits with the host country. In this

manner, governments of low income countries gain very little or negligible amounts from

FDIs in order to service the external debts. In the midst of this dark alley, net exports

come as a ray of light and helps in boosting the growth. The past trends presented by the

data of the thirty six low income countries depicts that they have paid and have high

amounts due to be paid as external debt servicing. These are not the high face values of

debts but the interest payments and penalties which are accumulating due to the late or no

payments. FDI and net exports are supporting well the growth of the under discussion

countries but the major part of these benefits is being offset by raised FDIs and external

debt servicing. Savings and internal interest rates have nothing to do with the growth in

the presence of external debt servicing for these low income countries and thus, they are

not growing well.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 20

On the basis of the drawn results, down are some suggestions made for the improvement

of the conditions of low income countries and their growth;

1. Low income countries must avail the option of debt forgiveness as it may

reduce the debt levels due on them to pay and may give a chance to flourish.

2. They must mobilize and channelize their private investments and resources in

a way that their production increases so that they can export huge number of

products and earn revenues to pay off debts.

3. They must attract FDI but not over crowd it and also refrain from giving a lot

of subsidies. No doubt, FDI will bring a lot of business innovations and

opportunities which will help low income countries to grow but a lot of

subsidies will eat up their due amount of revenues.

4. Encourage private investments by lowering the terms of borrowing and other

conditionalities.

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 21

References

Abid Hameed, Hammad Ashraf & [Link] Chauhadry (2008). External debt and its impact

on economic and business growth of Pakistan: International Research Journal of

Finance and Economics, ISSN 1450-2887 Issue 20 (2008)

Adepoju, Adenike Adebusola (2007). The Effects of External Debt Management on

Sustainable Economic Growth and Development: Lessons from Nigeria: MPRA,

2007

Albert, Brain & Paletha (2005). Economic growth and external debt servicing: a

cointegration analysis of Sri Lanka: International Research Journal of Finance

and Economics, ISSN 1450-2887 Issue 20 (2008)

Augustin Kwasi Fosu (2007). The external debt servicing constraint and public

expenditure composition: evidence from African economies: Wider Research

Paper 2007/36

Barbara Mbire (1997). Growth and foreign debt: The Ugandan experience: African

Economic Research Consortium- Kenya

Benedict, Rina & Taun (2003). External debt, public debt and growth in low-income

countries: IMF Working Paper, WP/03/249

Chris Ngassam (2009). Factors Affecting the External Debt-Servicing Capacity of

African Nations: An Empirical Investigation: ERAF, 2009

Christoper [Link], Alexandra Tabova (2003). Realignment of debt service obligations

and ability to pay in concessional lending: feasibility and modalities: Published by

World Bank

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 22

Christopher and Tabova (2005). Can we link concessional debt service to commodity

prices? : GRADE, discussion paper no. 8, 2005

E. Kohlscheen. Domestic vs. External Sovereign Debt Servicing: An Empirical Analysis:

Warvick Research Papers no. 904

Erdal Karagol (2002). The causality analysis of external debt service and GNP: a case of

Turkey: Central Bank Review 1 (2002) 39-64

Erdal Karagol. External Debt and Economic Growth Relationship Using the

Simultaneous Equations: JEL Classification: F34, C32 & H63

Feder & Just (1981). Projecting debt servicing of developing countries: Journal of

Financial and Quantitative Analysis (16)5: 651-669

Frimpong & Abayee (2006). The impact of external debt on economic growth of Ghana:

Journal of Science and Technology, Vol 26, No.3, 2006

George Ndoh. Macroeconomic effects of debt and debt reduction in Cameroon: African

Economic Research Consortium- Kenya

Gershon Feder. Economic Growth, Foreign Loans and Debt Servicing Capacity of

Developing Countries: World Bank, Staff Working Paper No. 274

Geske Dijkstra & Niels Hermes (2001). Debt relief and economic recovery in Latin

America: Lessons for HIPCs: XXIII International Congress of the Latin American

Studies Association (LASA) September 6-8, 2001

Geske Dijkstra & Niels Hermes (2001). The Uncertainty of Debt Service Payments and

Economic Growth of HIPCs: Is there a Case for Debt Relief? : WIDER

Discussion Paper No. 2001/122

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 23

Henrik Hansen. The Impact of Aid and External Debt on Growth and Investment:

CREDIT Research Paper No. 02/26

Imran Sharif Chauhadry, Shahnawaz Malik & Muhammad Ramazan (2009). Impact of

foreign debt and savings on Pakistan: Journal of Quality and Technology

Management, Volume V, Issue I1, Dec, 2009, pg. 101-115

Isa Audu (2004). The Impact of External Debt on Economic Growth and Public

Investment: The Case of Nigeria: African Institute for Economic Development

and Planning (IDEP)

Jaffery [Link] (1990). External debt, structural adjustment and economic growth:

International Monetary and Financial Issues for the 1990s, Vol. IX

James Akperan Adam (2003). The debt servicing capacity of Nigeria’s economy:

African Journal of Economic Policy, Vol. 10, No. 1, June 2003

Janice Abilene S. Patenio & Agustina Tan (2007). Economic Growth and External Debt

Servicing of the Philippines: 1981-2005: 10th National Convention on Statistics

(NCS), October 1-2, 2007

Jean Baneth (2003). Some Determinants of Debt Service Sustainability in Low-Income

Aid-Dependent Countries: World Bank, 2003

John & Sammy (2001). The debt service burden and growth: evidence from low income

countries: Journal of Development Economics, 32, 315-335

[Link], Hafeez & Jamshed ur Rehman (2001). Causal nexus between exports, economic

growth and external debt servicing: the case of Pakistan: International Economic

Journal, March; 20(1): 63-77

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 24

Martin Feldstein. International debt service and economic growth: some simple analytics:

NBER working paper series, working paper no: 2076

Medani Ahmed (2008). External Debts, Growth and Peace in the Sudan: SR 2008: 1

Melese Gizaw Desta (2005). External Debt and Economic Growth in Ethiopia: African

Institute for Economic Development and Planning (IDEP)

Michael P. Dooley (1993). Policy inconsistency and external debt service: Journal of

International Money and Finance 1994 13 (3) 364-374

Milton A. lyoha. External debt and economic growth in sub-Saharan African countries:

An econometric study: AERC Research Paper 90

P. Tsintzos, T. Efthimiadis. The Internal-External Debt Ratio and Economic Growth:

Journal of Policy Modeling, February 7, 2011

Professor Jan Willem Gunning & Dr Richard Mash (1998). Fiscal Implications of Debt

and Debt Relief: Issues Paper: DfID, Rep2000/01 November 1998

Rehana and Afia (2001). Debt and Economic Growth in South Asia: The Pakistan

Development Review 40: 4 Part II (Winter 2001) pp. 677–688

Syed Mansoob Murshid. Short and Long Run Macroeconomic Effects of Trade Policy in

the Presence of Debt Servicing: ISS, Working Paper No. 499

Tugrul Temel. Debt servicing capacity of developing countries and the case of Turkey:

The Central Bank of Republic Of Turkey, Discussion Papers no: 8810

W.A. Adesola (2009). Debt servicing and economic growth in Nigeria: an empirical

investigation: Global Journal of Social Sciences VOL 8, NO. 2, 2009: 1-11

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 25

Appendix A

LIST OF COUNTRIES

1. Bangladesh

2. Benin

3. Burundi

4. Cambodia

5. Central African Republic

6. Chad

7. Comoros

8. Congo, Dem. Rep.

9. Eritrea

10. Ethiopia

11. Gambia, The

12. Ghana

13. Guinea

14. Guinea

15. Guinea-Bissau

16. Haiti

17. Kenya

18. Kyrgyz Republic

19. Lao PDR

20. Madagascar

21. Malawi

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

 External Debt and Low-Income Countries 26

22. Mali

23. Mauritania

24. Mozambique

25. Myanmar

26. Nepal

27. Niger

28. Rwanda

29. Sierra Leone

30. Solomon Islands

31. Somalia

32. Tajikistan

33. Tanzania

34. Togo

35. Uganda

36. Zambia

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)