Debt Management as an Economic Growth Strategy in Sub-Saharan Africa: A Study of Selected Countries

Government debt management, as a distinct policy, with a clear objective of managing risks and cost minimisation first started among the industrialised economies in the late 1980s. The need to improve government debt management arose with rising debt levels, caused by macro-economic imbalances especially in the mid-1970s and 1980s. In sub-Saharan Africa however, debt management as a strategy was undeveloped or lacking completely. A research in the area of debt management is significant to the economic growth and development of the sub – Saharan Africa. The significance of debt management is supported by empirical studies showing that effective public debt management could go a long way in protecting both low and middle income countries against the negative impact of the financial crisis. This research focus specifically on the choice between short and long term, domestic and external debts and how the process affects the economy as measured by per capita income and debt ratio or level of indebtedness. The work also looked at the extent of implementation of debt management among the SSAs especially as contained in the World Bank and IMF debt management performance guidelines. The research adopted the quantitative approach to answer questions raised in relation to the effect of government borrowing; the choice of debt maturity, and how sovereign debt and its management affect economic growth. It was found that debt is related negatively to economic growth; and the phenomenon of debt overhang actually exists. Debt management however was found to be relevant; where it was observed that the entire process of debt management is vital to economic growth and the development of a country. In particular, countries in sub-Saharan Africa need to put in place an effective and sound debt management strategy that would aid in promoting the needed stability, reduce risks in borrowing and guide in the prudent management of borrowed resources. The work contribute to both theoretical and empirical aspects of debt and its management.