The Relation Between the External Debt and the Economic Growth: Case Study of Egypt

The persistence growth of Egypt's external debt has raised concerns regarding its impact on economic growth. This study examines the effect of the external debt on economic growth of Egypt .It adopted a time series analysis of ARDL (Auto- Regressive Distributive Lag model) on secondary data sourced from World Bank. The study tackles the period (1985- 2020).  GDP growth is used as a dependent variable and external debt servicing, savings, foreign direct investment and exports are the explanatory variables. The finding indicates that external debt had a positive effect on economic growth in Egypt. The study provides an understanding of
how the importance of external debt could be short-lived due to its misapplication. The result
reveals evidence to support a long-run equilibrium relationship between external debt and economic growth in Egypt. The result demonstrates that beyond a specific capacity, the short-run converges to equilibrium in the long-run and external debt would start to have a deteriorating impact on economic growth in Egypt. The findings of this study reinforce the need for policymakers to ensure proper application of external debt on economic activities that would lead to sustained long-term economic performance. Moreover, the government and development partners must put in place a monitoring mechanism to ensure the efficient use of borrowed funds.