Public Debt Service in South Africa and Its Impact on Economic Growth: An Empirical Test

Abstract

By applying the autoregressive distributed lag approach, this article investigates the dynamic impact of public debt service on economic growth in South Africa, covering the period from 1970 to 2017. In the recent past, alarming bells have already started sounding about the country’s high debt/gross domestic product (GDP) ratio amid chronic low GDP growth. The article seeks to contribute to the debate that limiting the proportion of public debt service payments to gross national product can achieve economic growth by freeing domestic resources. The empirical findings of the study show that there is no statistically significant relationship between public debt service and economic growth in South Africa, irrespective of whether the estimations are done in the long run or in the short run. Policy implications are discussed.