Public Debt Management and Economic Growth in Sierra Leone (1973-2022)

Sylvester Bob Hadji; Mohamed Ibrahim Justice Ganawah

doi:doi:10.11648/j.ijefm.20241204.12

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Public Debt Management and Economic Growth in Sierra Leone (1973-2022)

Sylvester Bob Hadji^*

, Mohamed Ibrahim Justice Ganawah

Published in International Journal of Economics, Finance and Management Sciences (Volume 12, Issue 4)

Received: 12 June 2024 Accepted: 1 August 2024 Published: 27 August 2024

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Abstract

Sierra Leone is a small developing country that continues to encounter enormous public debt challenges, principally as a result of inadequate Gross Domestic Product (GDP) and imprudent debt management. The country’s current debt-to-GDP ratio stands at 78.70%. The study investigates and analyses the impact of public debt on economic growth in Sierra Leone for the period 1973-2022. The study employs time series secondary data which were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt stock-to-GDP ratio and domestic debt stock-to-GDP ratio were specified in the models employed in this study. The variables were tested for stationarity using unit root tests before applying the Autoregressive Distributed Lag (ARDL) approach in running the regression with a view to ascertaining both short run and long run effects of public debt on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equations using appropriate econometric criteria. The study empirically reveals a negative impact of public debt (both domestic and external) on economic growth in Sierra Leone both in the short run and in the long run. Furthermore, the study reveals that in order to ensure effective public debt management in Sierra Leone, there must be effective management of capital projects financed by public debt and to ensure stable exchange rates to reduce cost of financing debt. The study, therefore, proffers strategic recommendations in line with the findings, including a review of Sierra Leone’s debt management strategy to ensure that public debt is directed towards productive capital projects.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 12, Issue 4)
DOI	10.11648/j.ijefm.20241204.12
Page(s)	217-234
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

External Debt, Domestic Debt, Debt Accumulation, Debt Service, GDP, Macroeconomic Variables

References

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[2]	Bangura, A. B. (2020), “Effect of Public Debt on Economic Growth in Sierra Leone”, Vol. 20, pp. 68-70.
[3]	Diamond, P. A. (1965), National debt in a neoclassical growth model. The American Economic Review, 55(5), 1126-1150.
[4]	Ejigayehu. D. A. (2013), “The effect of External Debt on Economic Growth”. Journal of the Department of Economics, Sodertom University.
[5]	Favour, O., S. Adeniyi., E. Obed., and A. Charity. (2019), “Public Debt and Economic Growth in Nigeria”, Asian Research Journal of Arts and Social Sciences, pp. 1-6.
[6]	Haffner, O. C. E., A. J. H. Aruna., and K. Adams. (2017), “Impact of Domestic Debt on Economic growth in Sierra Leone”: An Empirical Investigation, Vol. 17, No. 2 pp. 2-10.
[7]	Johnson, F. S., & F. O. Johnson (2018), “The Impact of External debt on Economic Growth: A Comparative Study of Sierra Leone and South Africa”. Journal of Sustainable Development in Africa. 10(3).
[8]	Khan. A. A., A. M. Rauf., and N. Anwar. (2016), The Impact of Public Debt on Economic Growth of Pakistan. International Journal of Academic Research in Economics and Management Sciences. 5(2), 46-56.
[9]	Lim, J. J. (2019), “Growth in the Shadow of Debt.” Journal of Banking and Finance 103: 98–112.
[10]	Lucky, E. U., & O. O. Godday. (2017), The Nigerian debt structure and its effects on economic performance. International Journal of Business and Management Review, 5(10): 79-88.
[11]	Matthew, A. A., A. S. Sellu., and A. E. Peters. (2017), The effects of debt management on sustainable economic growth and development: Lessons from Sierra Leone. Munich Personal REPEC Achieve (MPRA). pp. 2417.
[12]	Maxwell, E., T. Orekoya., and O. Damisa. (2021), “Does external debt impair economic growth in Nigeria’’?, Munich Personal RePEc Archive.
[13]	Michael, E., N. Mbam., and A. Emeka. (2019), “Public Debt and Nigeria‘s Economic Growth”, Journal of Economics and Finance. Vol. 10, pp. 22-40.
[14]	Modigliani, F. (1961), Long-run implications of alternative fiscal policies and the burden of the national debt. The Economic Journal, 71(284), 730-755.
[15]	Pesaran, M. C., and Y. Shin. (1998), “An Autoregressive Modeling Approach to Co-integration Analysis”, Economic society Monograhs, 371-413.
[16]	Public Debt Bulletin. (2018), Public Debt Management Division, Ministry of Finance, Sierra Leone. pp. 3.
[17]	Saungweme, T., and N. M. Odhiambo. (2020), The Impact of Domestic and Foreign Debt on Economic Growth: Empirical evidence from Zimbabwe. International Journal of Economics, 73(1), 77-106.
[18]	Sheikh, M. R., M. Z. Faradi., and K. Tariq. (2010), “Domestic Debt and Economic Growth in Pakistan”: An Empirical Analysis, Pakistan Journal of Science, 30(2), 373-387.
[19]	Snieška, V., and D. Burksaitiene. (2018), “Panel Data Analysis of Public and Private Debt and House Price Influence on GDP in the European Union Countries.” Engineering Economics 29(2): 197–204.
[20]	Sulaiman, L. A., & B. A. Azeez. (2012), “Effect of External Debt on Economic Growth of Sierra Leone”. Journal of Economic and Sustainable Development. 3(8).
[21]	Yusuf, A., and M. Saidatulakmal. (2021), “The Impact of Government Debt on Economic Growth in Nigeria’’, Cogent Economics & Finance, Vol. 9. No. 5, pp 1 -19.

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APA Style

Hadji, S. B., Ganawah, M. I. J. (2024). Public Debt Management and Economic Growth in Sierra Leone (1973-2022). International Journal of Economics, Finance and Management Sciences, 12(4), 217-234. https://doi.org/10.11648/j.ijefm.20241204.12

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ACS Style

Hadji, S. B.; Ganawah, M. I. J. Public Debt Management and Economic Growth in Sierra Leone (1973-2022). Int. J. Econ. Finance Manag. Sci. 2024, 12(4), 217-234. doi: 10.11648/j.ijefm.20241204.12

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AMA Style

Hadji SB, Ganawah MIJ. Public Debt Management and Economic Growth in Sierra Leone (1973-2022). Int J Econ Finance Manag Sci. 2024;12(4):217-234. doi: 10.11648/j.ijefm.20241204.12

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@article{10.11648/j.ijefm.20241204.12,
  author = {Sylvester Bob Hadji and Mohamed Ibrahim Justice Ganawah},
  title = {Public Debt Management and Economic Growth in Sierra Leone (1973-2022)
},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {12},
  number = {4},
  pages = {217-234},
  doi = {10.11648/j.ijefm.20241204.12},
  url = {https://doi.org/10.11648/j.ijefm.20241204.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20241204.12},
  abstract = {Sierra Leone is a small developing country that continues to encounter enormous public debt challenges, principally as a result of inadequate Gross Domestic Product (GDP) and imprudent debt management. The country’s current debt-to-GDP ratio stands at 78.70%. The study investigates and analyses the impact of public debt on economic growth in Sierra Leone for the period 1973-2022. The study employs time series secondary data which were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt stock-to-GDP ratio and domestic debt stock-to-GDP ratio were specified in the models employed in this study. The variables were tested for stationarity using unit root tests before applying the Autoregressive Distributed Lag (ARDL) approach in running the regression with a view to ascertaining both short run and long run effects of public debt on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equations using appropriate econometric criteria. The study empirically reveals a negative impact of public debt (both domestic and external) on economic growth in Sierra Leone both in the short run and in the long run. Furthermore, the study reveals that in order to ensure effective public debt management in Sierra Leone, there must be effective management of capital projects financed by public debt and to ensure stable exchange rates to reduce cost of financing debt. The study, therefore, proffers strategic recommendations in line with the findings, including a review of Sierra Leone’s debt management strategy to ensure that public debt is directed towards productive capital projects.
},
 year = {2024}
}

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TY  - JOUR
T1  - Public Debt Management and Economic Growth in Sierra Leone (1973-2022)

AU  - Sylvester Bob Hadji
AU  - Mohamed Ibrahim Justice Ganawah
Y1  - 2024/08/27
PY  - 2024
N1  - https://doi.org/10.11648/j.ijefm.20241204.12
DO  - 10.11648/j.ijefm.20241204.12
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 217
EP  - 234
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20241204.12
AB  - Sierra Leone is a small developing country that continues to encounter enormous public debt challenges, principally as a result of inadequate Gross Domestic Product (GDP) and imprudent debt management. The country’s current debt-to-GDP ratio stands at 78.70%. The study investigates and analyses the impact of public debt on economic growth in Sierra Leone for the period 1973-2022. The study employs time series secondary data which were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt stock-to-GDP ratio and domestic debt stock-to-GDP ratio were specified in the models employed in this study. The variables were tested for stationarity using unit root tests before applying the Autoregressive Distributed Lag (ARDL) approach in running the regression with a view to ascertaining both short run and long run effects of public debt on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equations using appropriate econometric criteria. The study empirically reveals a negative impact of public debt (both domestic and external) on economic growth in Sierra Leone both in the short run and in the long run. Furthermore, the study reveals that in order to ensure effective public debt management in Sierra Leone, there must be effective management of capital projects financed by public debt and to ensure stable exchange rates to reduce cost of financing debt. The study, therefore, proffers strategic recommendations in line with the findings, including a review of Sierra Leone’s debt management strategy to ensure that public debt is directed towards productive capital projects.

VL  - 12
IS  - 4
ER  -

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Author Information

Sylvester Bob Hadji

Department of Economics and Commerce, Fourah Bay College, University of Sierra Leone, Freetown, Sierra Leone

Contact Email

http://orcid.org/0009-0005-5639-9190
Mohamed Ibrahim Justice Ganawah

Department of Economics and Commerce, Fourah Bay College, University of Sierra Leone, Freetown, Sierra Leone

Contact Email

http://orcid.org/0000-0002-3141-4412

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Plain Text BibTeX RIS

APA Style

Hadji, S. B., Ganawah, M. I. J. (2024). Public Debt Management and Economic Growth in Sierra Leone (1973-2022). International Journal of Economics, Finance and Management Sciences, 12(4), 217-234. https://doi.org/10.11648/j.ijefm.20241204.12

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ACS Style

Hadji, S. B.; Ganawah, M. I. J. Public Debt Management and Economic Growth in Sierra Leone (1973-2022). Int. J. Econ. Finance Manag. Sci. 2024, 12(4), 217-234. doi: 10.11648/j.ijefm.20241204.12

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AMA Style

Hadji SB, Ganawah MIJ. Public Debt Management and Economic Growth in Sierra Leone (1973-2022). Int J Econ Finance Manag Sci. 2024;12(4):217-234. doi: 10.11648/j.ijefm.20241204.12

Copy | Download

@article{10.11648/j.ijefm.20241204.12,
  author = {Sylvester Bob Hadji and Mohamed Ibrahim Justice Ganawah},
  title = {Public Debt Management and Economic Growth in Sierra Leone (1973-2022)
},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {12},
  number = {4},
  pages = {217-234},
  doi = {10.11648/j.ijefm.20241204.12},
  url = {https://doi.org/10.11648/j.ijefm.20241204.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20241204.12},
  abstract = {Sierra Leone is a small developing country that continues to encounter enormous public debt challenges, principally as a result of inadequate Gross Domestic Product (GDP) and imprudent debt management. The country’s current debt-to-GDP ratio stands at 78.70%. The study investigates and analyses the impact of public debt on economic growth in Sierra Leone for the period 1973-2022. The study employs time series secondary data which were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt stock-to-GDP ratio and domestic debt stock-to-GDP ratio were specified in the models employed in this study. The variables were tested for stationarity using unit root tests before applying the Autoregressive Distributed Lag (ARDL) approach in running the regression with a view to ascertaining both short run and long run effects of public debt on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equations using appropriate econometric criteria. The study empirically reveals a negative impact of public debt (both domestic and external) on economic growth in Sierra Leone both in the short run and in the long run. Furthermore, the study reveals that in order to ensure effective public debt management in Sierra Leone, there must be effective management of capital projects financed by public debt and to ensure stable exchange rates to reduce cost of financing debt. The study, therefore, proffers strategic recommendations in line with the findings, including a review of Sierra Leone’s debt management strategy to ensure that public debt is directed towards productive capital projects.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Public Debt Management and Economic Growth in Sierra Leone (1973-2022)

AU  - Sylvester Bob Hadji
AU  - Mohamed Ibrahim Justice Ganawah
Y1  - 2024/08/27
PY  - 2024
N1  - https://doi.org/10.11648/j.ijefm.20241204.12
DO  - 10.11648/j.ijefm.20241204.12
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 217
EP  - 234
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20241204.12
AB  - Sierra Leone is a small developing country that continues to encounter enormous public debt challenges, principally as a result of inadequate Gross Domestic Product (GDP) and imprudent debt management. The country’s current debt-to-GDP ratio stands at 78.70%. The study investigates and analyses the impact of public debt on economic growth in Sierra Leone for the period 1973-2022. The study employs time series secondary data which were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt stock-to-GDP ratio and domestic debt stock-to-GDP ratio were specified in the models employed in this study. The variables were tested for stationarity using unit root tests before applying the Autoregressive Distributed Lag (ARDL) approach in running the regression with a view to ascertaining both short run and long run effects of public debt on economic growth in Sierra Leone. Various diagnostic tests were carried out to appraise the robustness of the estimated growth equations using appropriate econometric criteria. The study empirically reveals a negative impact of public debt (both domestic and external) on economic growth in Sierra Leone both in the short run and in the long run. Furthermore, the study reveals that in order to ensure effective public debt management in Sierra Leone, there must be effective management of capital projects financed by public debt and to ensure stable exchange rates to reduce cost of financing debt. The study, therefore, proffers strategic recommendations in line with the findings, including a review of Sierra Leone’s debt management strategy to ensure that public debt is directed towards productive capital projects.

VL  - 12
IS  - 4
ER  -

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