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An evaluation of relationship between public debt and economic growth: A study of Afghanistan

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  • Wani, Nassir Ul Haq
  • Kabir, Habib

Abstract

Public debt is one of the main macroeconomic indicators, which forms countries’ image in international markets. It is one of the inward foreign direct investment flow determinants. A prudent public debt management helps economic growth and stability through mobilizing resources with low borrowing cost and limiting financial risk exposure. The objective of this study was to establish the relationship between public debt and economic growth in Afghanistan. The study used secondary data collected from various sources collected from Ministry of Finance, treasury directorship, debt department, World Bank web page and Da Afghanistan Bank. The study period included 2008-2012 financial periods. The data was collected using data collection sheet which was edited, coded and cleaned. To establish the relationship between public debt and economic development, the study conducted a regression analysis. Domestic debt is characterized by higher interest rates compared with those on external debt, which is contracted mainly on concessional terms, and it is therefore expensive to maintain. Domestic debt reduction could be achieved using proceeds from the privatization program of public corporations, or the use of externally borrowed resources which are mainly on concessional terms to retire more expensive domestic debt. The government should therefore develop a framework for recording and monitoring all contingent liabilities and also formulate and implement a policy for management of the contingent liabilities. The government should therefore continue to implement wider reforms that promote investment in Treasury bonds, and encourage institutional investors such as pension funds and insurance companies to invest in Treasury bonds.

Suggested Citation

  • Wani, Nassir Ul Haq & Kabir, Habib, 2016. "An evaluation of relationship between public debt and economic growth: A study of Afghanistan," MPRA Paper 75538, University Library of Munich, Germany, revised 10 Nov 2016.
    • Handle: RePEc:pra:mprapa:75538
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    Cited by:

    1. Sakhizada, Ahmad Fawad & Rasa, Mohammad Mirwais, 2019. "Factors Influencing the Performance of Small & Medium Enterprises (SMEs) in Trade: Empirical Evidence from Afghanistan," MPRA Paper 122727, University Library of Munich, Germany, revised 17 Dec 2019.
    2. Rlung, Ahmad Saleem & Rasa, Mohammad Mirwais, 2021. "Impact of Afghanistan-Pakistan Transit Trade Agreement on Afghanistan Trade: An Empirical Exploration," MPRA Paper 122588, University Library of Munich, Germany, revised 23 Dec 2021.
    3. Rasa, Mohammad Mirwais, 2022. "Dynamic of Trade Specialization and Performance of SAFTA: A Case Study of Afghanistan," MPRA Paper 122505, University Library of Munich, Germany, revised 25 Oct 2024.
    4. Wani, Nassir Ul Haq, 2023. "Decoding Social Media’s Role in the Resurgence of the Taliban: A Literature Review," MPRA Paper 121874, University Library of Munich, Germany, revised 09 May 2024.
    5. Rasa, Mohammad Mirwais & Sharifi, Mujeeb, 2021. "Nexus between Women Empowerment, Poverty Reduction, and Relevance with Trade: A Case Study of Afghanistan," MPRA Paper 122574, University Library of Munich, Germany, revised 13 Apr 2022.
    6. Wani, Nassir Ul Haq & Hatam, Ahmad Khalid, 2022. "Afghanistan's Regulatory Business Environment: Exploring the Impact on Trade," MPRA Paper 122418, University Library of Munich, Germany, revised 14 Sep 2024.
    7. Sabar, Parisa & Rasa, Mohammad Mirwais, 2021. "Impact of COVID-19 on Women-Led SMEs in Kabul: Linking and Understanding their Role in Trade and Empowerment," MPRA Paper 122511, University Library of Munich, Germany, revised 08 Oct 2024.
    8. Wardak, Ahmad Shah & Rasa, Muhammad Mirwais, 2024. "Determinants of Trade Costs of Afghanistan with its Major Trading Partners: An Empirical Examination," MPRA Paper 122953, University Library of Munich, Germany, revised 04 Dec 2024.
    9. Karokhi, Somaya & Rasa, Mohammad Mirwais, 2020. "Impact of Corruption on Foreign Direct Investment, Tax Revenues and Trade in Afghanistan: An Empirical Examination and Literature Review," MPRA Paper 122672, University Library of Munich, Germany, revised 08 Jun 2021.

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    More about this item

    Keywords

    Afghanistan; Public debt; Economic growth.;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H8 - Public Economics - - Miscellaneous Issues

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