External Debt, Domestic Debt and Inclusive Growth: Evidence from Sub-Saharan Africa

This study examines the differential effects of external and domestic debt on inclusive growth in 35 Sub-Saharan African countries from 2000 to 2022. Using system GMM and robust fixed effects estimations, the results show that external debt significantly undermines inclusive growth, particularly in countries with low financial development, reflecting debt overhang and crowding-out effects. Domestic debt, however, promotes inclusive growth in financially underdeveloped economies, suggesting its potential as a viable financing tool when prudently managed. The study contributes by distinguishing debt types and demonstrating how financial development conditions their influence on inclusive growth.