Does External Debts Promote Sustainable Economic Development in Developing Countries?

Abstract

External debts are one of the major sources of revenue to developing nations that normally do not have an enough industrial support and is illustrated by a small Human Development Index (HDI).  The aim of this paper is to  test  if  external  debts promote  sustainable  economic  development  in  developing  countries  or  not.  The study opted a  time  series  data  research design  where  by  secondary  data  were  used.  The population applied on the financial records from 1999/2000 -2019/2020 financial years (Quarterly Data). The sample size of the study was 80 quarterly observations. Kenya was purposively sampled to be used as research area of this study. The data collected from different reliable sources  which  included  the  International  Financial  Statistics  (IFS), World Bank’s Statistical Database (WBSDs), The Treasury of Kenya (TK), Ministry of Devolution and  Planning  (MDP  and  the  Kenya  National  Bureau  of  Statistics  (KNBS). The results of the study revealed that there is long -term associations between external debts and  sustainable  economic  development  with  P-Value  of  0.0001.  Also,  explained significantly by all the other macro-economic variables in the predictable direction with P-Value of 0.0011, except broad inflation and money that have vague signs. In short-run revealed that external debts affect statistically significance economic development with a negative direction P-Value of 0.0064. The study recommends that the government should think  about  adopting  other  sources  of  finance  articulate  via  taxation  and  reduce borrowing  outside  to  minimize  assistance  from  developed  nations.  The government should  also  assign  extra  resources  to  savings  in  human  capital  education  as efficiently labor has the effect of promoting sustainable economic development crosswise all models in  the  short  run.  Particularly  population  expansion  rate  should  be  proscribed  through increasing  utilize  of  social  services  such  as  family  planning  or  sensitization  to  reduce support pressure on imperfect resources which deject economic development