The relation between the external debt and the economic growth: case study of Egypt

Abstract EN

The persistence growth of Egypt's external debt has raised concerns regarding its impact on economic growth.

this study examines the effect of the external debt on economic growth of Egypt.it adopted a time series analysis of ARDL (auto-regressive distributive lag model) on secondary data sourced from world bank.

the study tackles the period (1985-2020).

GDP growth is used as a dependent variable and external debt servicing, savings, foreign direct investment and exports are the explanatory variables.

the finding indicates that external debt had a positive effect on economic growth in Egypt.

the study provides an understanding of how the importance of external debt could be short-lived due to its misapplication.

the result reveals evidence to support a long-run equilibrium relationship between external debt and economic growth in Egypt.

the result demonstrates that beyond a specific capacity, the short-run converges to equilibrium in the long-run and external debt would start to have a deteriorating impact on economic growth in Egypt.

the findings of this study reinforce the need for policymakers to ensure proper application of external debt on economic activities that would lead to sustained long-term economic performance.

moreover, the government and development partners must put in place a monitoring mechanism to ensure the efficient use of borrowed funds.

keywords: external debt; government investment; economic growth; policy; Egypt.

research significance: this paper focuses on studying the impact of external debt on the economic growth in Egypt.

although the literature covers this issue in different countries this issue hasn't been tackled before in Egypt.

most of the studies that cover the Egyptian case discussed the relationship between public debt and economic growth but not the external debt explicitly.

so this paper tries to cover the gap in the literature by studying the impact of external debt on economic growth in Egypt during the period.

research question: what is the relationship between external debt and economic growth in Egypt? sub-questions: 1.

what is the nature of the relationship between external debt and economic growth? 2.

what are the main reasons for accumulated external debt in Egypt? 3.

what is the situation for economic growth, debt sustainability and debt servicing in Egypt? 4.

what is the impact of external debt on economic growth in Egypt using econometric model? 5.

what are the recommendations and policies to decrease external debt and enhance economic growth in Egypt?