The effects of external debt servicing on infrastructure spending: a case of Zambia

Infrastructure development has been found to be a driver of economic growth. In light of the increased levels of public external debt contraction over the last few years, how would the Zambian government approach the process of budget allocation towards infrastructure development in response to the debt servicing charges? This study examines the effects of public external debt servicing on infrastructure spending in Zambia using time series data from 1970 to 2014 and the Auto Regressive Distributed Lag Model or Bounds Testing Approach to Cointegration as emphasized by Pesaran et al. to test for long-run equilibrium relationship. The study takes into consideration that at some point during this period, the Highly Indebted Poor Countries Initiative was implemented which saw a large sum of Zambia's external debt cancelled. The data which are purely secondary were sourced through the World Development Indicators and Africa Development Indicators database. The regression results show that debt servicing is found to have a negative impact on infrastructure spending in Zambia.