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The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021)

The study investigates the impact of domestic debt on economic growth in Sierra Leone for the period covering 1973 to 2021. The study employs time series secondary data from various sources including the Central Bank of Sierra Leone, the Ministry of Finance and the World Bank Development Indicators. Key macroeconomic variables such as domestic debt-to-GDP ratio, domestic debt service-to-export earnings ratio, terms of trade and inflation were specified in the model employed in this study. The variables were tested for stationarity using unit root tests before applying Autoregressive Distributed Lag (ARDL) model in running the regression with a view to ascertaining both long run and short run effects of domestic debt variables on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative impact of domestic debt on economic growth in Sierra Leone for the period under study as clearly evident in the coefficients of the debt as a ratio of GDP, debt service as a ratio of export earnings and terms of trade. Clearly, both debt stock and debt service variables were found to generally exhibit negative impact on economic growth in the short run, as well as long run. The study, therefore, proffers strategic recommendations such as the need to review Sierra Leone’s domestic debt management strategy and to promote private investment, among others.

Domestic Debt, Domestic Debt Accumulation, Debt Service, Debt Overhang, GDP, Private Investment, Economic Growth

APA Style

Sylvester Bob Hadji. (2023). The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). Journal of Investment and Management, 12(2), 16-25. https://doi.org/10.11648/j.jim.20231202.11

ACS Style

Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J. Invest. Manag. 2023, 12(2), 16-25. doi: 10.11648/j.jim.20231202.11

AMA Style

Sylvester Bob Hadji. The Impact of Domestic Debt on Economic Growth in Sierra Leone (1973 to 2021). J Invest Manag. 2023;12(2):16-25. doi: 10.11648/j.jim.20231202.11

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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