The Impact of Foreign Debt and Government Debt on Economic Growth in South Africa

Abstract

Debt management has always been a major concern for many developing countries. South Africa's foreign debt was reported to have reached its highest in 2017, where debt levels reached 48.8 percent of gross domestic product. At economically sustainable levels, borrowing in itself ought not to be an issue, however it is rather unfortunate that most sub-Saharan nations including South Africa have accumulated high, unsustainable amounts of debt, which may have constrained the progression of economic growth and development. Making use of the auto regressive distributive lag model (ARDL), this study examines the relationship between foreign debt and government debt on economic growth in South Africa from 1980 to 2018. The findings of the study reveal that sound debt management may lead to economic prosperity.

Debt-financed fiscal stimulus in South Africa

“…(see, e.g. Fedderke 2020;Mhlaba and Phiri 2019;Mothibi 2019;Peter and Grandes 2005; Soobyah and Steenkamp 2020a,b).5 Peppel-Srebrny (2021) raises a similar point to motivate their econometric approach and contribution to the literature. In fact, the author finds no existing literature that empirically tests the relevance of the composition of government budget deficits for government bond yields.6 In addition,Ramey (2011) shows that anticipation ('news') matters for DFFS.…”