Public Debt and Economic Growth Nexus in Zimbabwe

Abstract

Zimbabwe’s public debt has been increasing over the past decade. There is limited literature analyzing public debt and economic growth nexus in Zimbabwe. This study examines the relationship between public debt and economic growth in Zimbabwe. Ordinary Least Square (OLS) method has been used to analyze 1980 to 2016 time series data for Zimbabwe. The study found that there is a negative significant relationship between external debt and economic growth in Zimbabwe for the period under study. Exchange rate and inflation were also found to have negative significant relationships with economic growth in Zimbabwe. However, external debt service was found to have a significant positive relationship with economic growth.  In view of this, the study recommends that the government should step up efforts to boost sources of domestic revenue to finance its growth plans as external debt accumulation weighs down economic growth. The need to diversify the economy is crucial as government should develop new   sectors which can generate revenue to contribute towards economic growth.

Keywords: Public debt, Economic growth, GDP, Zimbabwe