Saving Behavior and External Debt Service: The West African Perspective

Abstract

The paper investigated the effect of saving behavior and debt-service on the debt burden and its effect on some economic indicators, debt service to export, export to GDP, debt service to GDP, savings rate and income per capita of 14 West African Countries. The data from the World Bank economic indicators for the period 1985-2015 were used as models. This was analyzed using fixed and random effect regressions and houseman tests to determine the most appropriate estimator. The results revealed that the national savings of these countries should play a significant role in terms of payment of debt services and the countries' ability to reducing their total debt burden. It is also revealed that an increase in the export/GDP growth will lead to growth in the country’s economy by providing more resources to pay the national debt, both external and domestic debt. The national saving rate should aim at improving the economic growth rate through a higher saving ]rate. The paper recommends that these countries should pursue a balanced saving policy, increase the export/GDP ratio and total revenue generated for a fully sustainable reduction of total debt burden so that future generations would not inherit a huge debt burden.