The Impact of Foreign Debt on Economic Growth in Malawi

Abstract

Abstract This study analysed the impact of foreign debt on economic growth in Malawi using time series. Data for the period 1975–2003 from the Reserve Bank of Malawi, the IMF and the National Statistical Office was regressed in basic time series analysis. The dependent variable was economic growth and independent variables included level of foreign debt as the main variable. Other variables considered are the inflation rate, exchange rate and the prime lending rate, private and public investment. The results show a statistically insignificant and negative relationship between foreign debt and economic growth for the case of Malawi. The country should strive to provide incentives to local manufacturers who would want to export rather than relying on borrowing for growth inducement. Of interest was the relationship between inflation and economic growth which was positive.

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