The Effects of External Debt Stock on Economic Growth (Gross Domestic Product) in Tanzania

Most nations in developing countries including Tanzania strive to accelerate its economic growth which is commonly measured using Gross Domestic Product (GDP). In the efforts to make sure this desire is attained; external debts are often taken from international organizations as well as partner countries in order to invest in development projects. In this regard, this study aims to analyze the effects of External Debt Stock on Economic Growth (Gross Domestic Product) in Tanzania. The World Bank’s data on External Debt and Gross Domestic Product from 1991 to 2022 was used in order to achieve the purpose of this study. In data analysis the Vector Autoregressive Regression (VAR) Model was chosen, in which a Debt Sustainability Framework (DSF) was employed. The findings of this study revealed that the Gross Domestic Product was influenced by its past values, which suggests that the economy is capable to sustain by itself in prospering the economy forward. Also, according to the findings, external debt stock was found to have no effect on Gross Domestic Product suggesting the presence of other factors to reinforce economy growth. Further, this study found no bidirectional causation between external debt stock and Gross Domestic Product meaning that external debt stock and Gross Domestic Product function independently.