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VOL. 7, ISSUE 2 (2025)
An analysis of the correlation between external debt and economic growth (GDP) In Zambia
Authors
Teddy Munchini Kasuba, Lubinda Habbazoka
Abstract
This desk research study analyses the relationship
between external debt and economic growth (GDP) in Zambia from 2020 to 2024.
The correlation analysis reveals a strong positive relationship (r = 0.909),
suggesting that external debt inflows have been associated with increased GDP,
particularly in critical sectors like infrastructure, energy, and mining. While
excessive external debt is often linked to negative economic outcomes, Zambia's
reliance on external financing to support key industries, such as copper
mining, may have contributed to its economic growth despite the debt burden. In
contrast, the analysis between external debt and debt repayment reveals a
negative correlation (-0.652), indicating that rising debt repayment
obligations are becoming an increasing challenge. This growing debt servicing
burden could crowd out public investments in essential sectors like health and
education, potentially limiting long-term sustainable development. Lastly, the
correlation between external debt and economic policies (r = 0.709) highlights
the influence of debt on Zambia’s fiscal decisions, with the government
adjusting policies to manage debt levels and service obligations. The study
underscores the complex dynamics of external debt in developing economies,
emphasizing the need for effective debt management strategies and policy
adjustments to balance growth with long-term fiscal sustainability. Based on
these findings, several recommendations are made. First, Zambia should consider
diversifying its debt sources by exploring alternative financing options such
as public-private partnerships (PPPs) and increasing domestic savings and
investments to reduce dependency on foreign debt. Second, strengthening debt
management frameworks is critical by enhancing transparency in debt contracts,
setting clear debt limits, and maintaining accurate debt reporting. Third,
focusing on economic diversification into sectors like agriculture,
manufacturing, and technology is essential to reduce vulnerability to global
commodity price fluctuations and improve resilience against external debt
shocks.
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Pages:31-38
How to cite this article:
Teddy Munchini Kasuba, Lubinda Habbazoka "An analysis of the correlation between external debt and economic growth (GDP) In Zambia". International Journal of Management and Economics, Vol 7, Issue 2, 2025, Pages 31-38
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