The Impact of External Debts on Economic Growth: An Empirical Assessment of the Sudan: 1978-2001

This paper investigates, from an empirical point of view, the impact of Sudan's external indebtedness on economic growth over the period (1978-2001). In addition to that, the growth rate of real export earnings is included in the empirical model to capture the impact of export promotion strategy in inducing economic growth, while inflation rate is incorporated as a macroeconomic policy variable. The results of the study reveal the existence of debt overhang problem in Sudan, i.e. external debts exceed the country's repayment ability. The study concluded that external debt and inflation deter economic growth, while export earnings have positive impacts. Thus, the findings of this study support the need of Sudan to be considered for comprehensive debt relief measures. The study recommends the adoption of export- led growth strategy besides improving infrastructure. Furthermore, encouraging domestic saving and realizing peace in a united Sudan will help restore debt sustainability.