External Debt Sustainability and Economic Growth in Sudan

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ABSTRACT

Literature on the role of external debt on Sudan's development and economic growth is still limited and hence current research will be a significant addition in emphasizing the positive or negative impact of external debt on Sudan's economy during 1978-2010. Use of econometric tools will provide empirical evidences to the findings and will support the suggestions made in the light of current study. Understanding and altering the known deteriorating role of external debt services in the process of growth on indebt countries is essential in this context.

ABSTRACTii

CHAPTER 01: INTRODUCTION1

Background2

Sudan experienced a watershed marked in 20112

Different initiatives may provide eligibility for Sudan to obtain debt relief3

Debt relief strategy and comprehensive clearance of arrears followed by the re-engagement with major development partners3

Structure of External Debt4

CHAPTER 02: LITERATURE REVIEW6

CHAPTER 03: METHODOLOGY9

Data and Research Methodology9

Hypothesis10

Model Specification10

Expected Findings11

REFERENCES12

APPENDIX14

CHAPTER 01: INTRODUCTION

Developing countries experienced the period known as “Golden Years” during 1950s and 1960s. The reason for this period to be declared as “Golden Years” in the economic literature is the high and internally generated growth of economies of developing countries. The regions then known as third world relied very less on the foreign assistance and the key to success was the utilization of domestic resources. I contrast to these two decades; growth of less developed countries (LDCs) in 1970s was lead by external debt. The payment gaps were financed through heavy borrowing from the financial institutions like international capital and money market and thus the borrower countries faced persistent current account deficits. Early borrowing from external resources that was started in 1970s resulted in debt burden faced by the recipient countries since 1980s. Definition of debt has no specificity in today's world; a common concept suggests that debt refers to an obligation on a person that is owned legally by another. The reasons for which countries borrow money are classified into two categories by Soludo (2003); one purpose is the circumvention of hand budget or in other words to obtain lower the nominal interest rates due to the lack of domestic long term credit through financing the transitory balance of payment (BOP) deficit. The other reason is related to macro-economic following the assumption that higher investment leads to higher consumption that is health or education. These reasons for borrowing reflect the fact that in order to reduce poverty and achieve higher economic growth, the economy of recipient country indulges in debt. The other solution to tackle the macro economic and financial crisis is the implementation of macro-economic policies but the policies are often found to be instable that distorts sizeable adverse shocks and economic incentive. Hence, timely debt payments can allow the growth to increase at faster pace. Poverty reduction is mainly drives from growth per capita more than from the overall growth. Growth per capita is assured when the circle of borrowing and payment is maintained for a period of time. The theories that support the assumption of risk of debt denial as a constraint in frequent borrowing also ...