An econometric assessment of external debt sustainability indicators in Zambia

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dc.contributor.advisorKabinga, Mundiaen_ZA
dc.contributor.authorNg'andwe, Mumbi Tengaen_ZA
dc.date.accessioned2018-11-07T13:03:37Z
dc.date.available2018-11-07T13:03:37Z
dc.date.issued2015en_ZA
dc.description.abstractGiven inadequate domestic resources, as well as political and social pressures for development projects, Zambia will tend to run high budget deficits, and become very dependent on external debt. Thus debt sustainability becomes a major policy goal. This study investigated the significant macroeconomic factors that can influence external debt sustainability. These are GDP growth; Government revenues; exports; public expenditure; interest rate and exchange rate. The study employed simple Ordinary Least Squares (OLS) as well as a Vector Auto Regression (VAR) to capture dynamic relationships. The results revealed that exports and interest rates were positively related to sustainability. Revenues, GDP growth and Exchange rate were inversely related to debt sustainability. The total expenditure to GDP was inversely related to sustainability while current expenditure was positively related to sustainability probably due to prudent use of current expenditure on economic factors that stimulated growth. Capital expenditure was not significant to sustainability which may reflect the poor attention paid to infrastructure development in Zambia. The impulse response of the solvency indicator to revenue, GDP growth and total expenditure/GDP were generally negative over a ten year period. The policy implication is that in order to keep the debt sustainable, the debt resources must be used to maximise GDP growth and enhance public revenue. The impulse responses from exchange rate and interest rates to shocks on the solvency indicator were positive. The impulse response of SI from impulses in exports was negative. These are factors that are not completely in the control of the Government. The policy implication in contracting international debt is that Government should go for the lowest possible interest rate. Government should do its best to develop credible export promotion policies that can directly impact on the SI and also help to stabilize the exchange rate.en_ZA
dc.identifier.apacitationNg'andwe, M. T. (2015). <i>An econometric assessment of external debt sustainability indicators in Zambia</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Research of GSB. Retrieved from http://hdl.handle.net/11427/29035en_ZA
dc.identifier.chicagocitationNg'andwe, Mumbi Tenga. <i>"An econometric assessment of external debt sustainability indicators in Zambia."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Research of GSB, 2015. http://hdl.handle.net/11427/29035en_ZA
dc.identifier.citationNg'andwe, M. 2015. An econometric assessment of external debt sustainability indicators in Zambia. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Ng'andwe, Mumbi Tenga AB - Given inadequate domestic resources, as well as political and social pressures for development projects, Zambia will tend to run high budget deficits, and become very dependent on external debt. Thus debt sustainability becomes a major policy goal. This study investigated the significant macroeconomic factors that can influence external debt sustainability. These are GDP growth; Government revenues; exports; public expenditure; interest rate and exchange rate. The study employed simple Ordinary Least Squares (OLS) as well as a Vector Auto Regression (VAR) to capture dynamic relationships. The results revealed that exports and interest rates were positively related to sustainability. Revenues, GDP growth and Exchange rate were inversely related to debt sustainability. The total expenditure to GDP was inversely related to sustainability while current expenditure was positively related to sustainability probably due to prudent use of current expenditure on economic factors that stimulated growth. Capital expenditure was not significant to sustainability which may reflect the poor attention paid to infrastructure development in Zambia. The impulse response of the solvency indicator to revenue, GDP growth and total expenditure/GDP were generally negative over a ten year period. The policy implication is that in order to keep the debt sustainable, the debt resources must be used to maximise GDP growth and enhance public revenue. The impulse responses from exchange rate and interest rates to shocks on the solvency indicator were positive. The impulse response of SI from impulses in exports was negative. These are factors that are not completely in the control of the Government. The policy implication in contracting international debt is that Government should go for the lowest possible interest rate. Government should do its best to develop credible export promotion policies that can directly impact on the SI and also help to stabilize the exchange rate. DA - 2015 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2015 T1 - An econometric assessment of external debt sustainability indicators in Zambia TI - An econometric assessment of external debt sustainability indicators in Zambia UR - http://hdl.handle.net/11427/29035 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/29035
dc.identifier.vancouvercitationNg'andwe MT. An econometric assessment of external debt sustainability indicators in Zambia. [Thesis]. University of Cape Town ,Faculty of Commerce ,Research of GSB, 2015 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/29035en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentResearch of GSBen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherDevelopment Financeen_ZA
dc.titleAn econometric assessment of external debt sustainability indicators in Zambiaen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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