Sovereign Debt Threshold and Growth in the Sub-Saharan Africa: A Historical Data Approach

Abstract:

Scholars have argued that excessive sovereign debts at certain levels could impact negatively on the economic growth of a borrowing nation. Studies however suggest a contrary view of the phenomenon. This study examines trends in debt-to-GDP-ratios, viz-a-viz economic growth, with a view to ascertaining whether there is a particular debt threshold beyond which borrowing can pose a threat to economic prospects of a nation. By use of the descriptive analysis the study samples four sub-Saharan African countries and review trends in gross government debt-to-GDP-ratio, and economic growth, to establish whether shock variables other than debt are responsible for the unfavourable growth recorded among highly indebted countries. The study confirms that a country’s level of indebtedness may not necessarily be responsible for poor growth prospects.