The Impact Of External Debt On Economic Growth In Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Abinet Gebrekidan


A group of low-income countries classified as HlPCs have continued to experience difficulties in managing and servicing their huge stocks of external debt. Most of these countries including Ethiopia are in sub-Saharan Africa. The relatively high level of Ethiopia’s external indebtedness and rising debt burden has serious implications on the country’s development and debt sustainability initiatives. While the economic performance continue to deteriorate, there have been significant net outflow of resources to meet the debt obligations. The study pin downs vital role of the emerging field of external debt and debt indicators in the Ethiopian economy with emphasis on empirical relationship of external debt and economic growth over the period 1963/64-2003/04. In doing so, this paper examines the magnitude and structure of the country’s external debt, and its impact on economic growth across its three economic regimes. Using time series data for the same period, the empirical results indicated that past external debt accumulation has a negative impact on economic growth. Debt servicing also appears to affect economic growth adversely. Several policy implications emerge from the study. The simultaneous attainment of sustainable levels of economic growth and external debt appear difficult at the moment and could remain elusive if aggressive measures are not undertaken. The results obtained from this study support the need for Ethiopia to be considered for comprehensive debt relief measures. In addition, creating credibility including political will to reforms is required to spur investor confidence for both local and foreign investments.

Corporate Author: Getnet Alemu and Getachew Yoseph (Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: Ethiopian Economic Association (EEA)
ISBN/ISSN: 978-9994-54-03-7
Primary Descriptors:

external debt

Secondary Descriptor:

Debt, Economic GROWTH – 1963-2004

Geographic Descriptors: Ethiopia
Cataloge Date: 02/27/2013
Broad Subject heading: GROWTH AND DEVELOPMENT
Call Number: 330.963 PRO 2007
Serial Key Title: Proceedings of the Fourth International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Volume: I
Publication date: 2013-05-27 00:00:00
Forum or Discussion date: 2013-02-27 00:00:00
PDF file: Abinet Gebrekidan_The impact of external debt on economic Growth in Ethiopia.pdf
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Author: Abinet Gebrekidan

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