Title: Determinants of external debt in South Africa: a VAR-based approach

Authors: Genius Murwirapachena; Forget Mingiri Kapingura

Addresses: Department of Economics, Nelson Mandela Metropolitan University, Summerstrand Campus (South), P.O. Box 77000, Port Elizabeth, 6031, South Africa ' Department of Economics, University of Fort Hare, East London Campus, East London, South Africa

Abstract: The external debt issue has recently been a subject of topical concern in South Africa. In the 2014 budget review, the Treasury proposed to increase external debt as a percentage of GDP from the 2013 figure of 39.9% to about 43.9% by 2016. This proposal was contrary to the IMF recommendation that South Africa should cut its external debt to figures below 40% of its GDP. In this paper, the vector auto-regression model was used to analyse the determinants of the South African external debt utilising annual data from 1980-2013. Empirical results reveal that external debt in South Africa is mainly due to sluggish levels of economic growth and high levels of government spending on infrastructure.

Keywords: South Africa; external debt; foreign debt; government debt; economic growth; government expenditure; infrastructure spending.

DOI: 10.1504/IJEPEE.2015.069593

International Journal of Economic Policy in Emerging Economies, 2015 Vol.8 No.2, pp.138 - 152

Received: 25 Feb 2014
Accepted: 22 Mar 2014

Published online: 28 May 2015 *

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