Effect of External Public Debt on Economic Growth: an Empirical Analysis of East African Countries

1.4 Objective of the Study 
The main study's main was to determine the effects of external public debt on economic growth 
in EAC member countries. 
1.4.1 Specific Objectives 
i.
To establish the relationship between external public debt and economic growth in EAC 
region. 
ii.
To determine the optimal cost-risk trade-off for the EAC member countries? 
iii.
To recommend an optimal policy prescription for prudent management of public external 
debt component. 
1.5 Significance of the Study 
The EAC member countries have increasingly accumulated both external and domestic debt over 
the years. The volume of outstanding external obligations is raising concern about the future 
sustainability. Given the weak institutional and regulatory framework governing debt 
management, it is important to establish a stable causal relationship between external public debt 
and economic growth. This will not only provide a more prudent approach to debt management 
but also help improve the rating of creditworthiness of the country. This study is therefore crucial 
for the countries in the region given that it promotes policies that will ensure countries are 
leveraged towards enhancing economic growth through capital accumulation, domestic 
investment and productivity growth. The study utilized data from various secondary sources 
including all Reserve Banks, National Statistics offices, and World Bank. The data used was for 
the period 1981 to 2014. 

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CHAPTER TWO 
LITERATURE REVIEW 
2.1 Introduction 
This chapter is aimed at identifying and evaluating opinions, contributions, and findings of 
various studies that have been done before by different scholars and institutions. This chapter 
looks at the relevant literature done by past researchers to shed more light on the effects of 
external public debt on economic growth.