The impact of debt service on economic growth:Empirical evidence from Zambia

Abstract

This study contributes to existing public debt service-economic growth literature by rendering empirical evidence from Zambia using time-series method covering the period from 1970 to 2017. The study applied the autoregressive distributed lag (ARDL) bounds analysis technique which permits the simultaneous estimation of the long- and short-run model parameters. In overall terms, the empirical results reveal that the impact of government debt service on economic growth in Zambia is time-variant. Whereas the neutrality of public debt service on economic growth is confirmed in the long run, in the short run the relationship is negative. To achieve macroeconomic stability and realise sustainable economic growth rates, the paper recommends the Zambian government to, among other things, undertake active fiscal consolidation to ensure that debt repayments do not cause excessive budget overruns and are not financed from new debt; and continuously improve public debt management strategies and policies to smoothen government debt redemption profile.