Government Debt and Economic Growth: Evidence from ECOWAS and SADC

The article investigated the impact and threshold of government debt on economic growth in 15 SADC as well as 15 ECOWAS countries from 1970 to 2017. The system Generalized Methods of Moments (GMM) panel data model was utilised. The study found that on average, a 1% increase in government debt share to GDP results in an average decline in economic growth of 0.162% and 0.121% in SADC as well as ECOWAS respectively. However, the government's debt share to GDP threshold above 60% reflects higher economic growth for ECOWAS, while threshold of 30% exhibit higher economic growth for SADC. Any government debt share to GDP thresholds outside these ranges is associated with lower economic growth. It is recommended that countries in both regional groupings keep their government debt threshold of 60% or below as stipulated in the Protocol on Finance and Investment to minimise the burden of government debt on economic growth.