Abstract

This study investigates and analyses the overlap thesis between colossal foreign debt burden and Sierra Leone’s economic growth for the period covering 1970 to 2024. Significant macroeconomic variables including foreign debt stock to Gross Domestic Product ratio (FDGDP), foreign debt service to export earnings ratio (FDSEXP), export growth (EXPGR), budget deficit to Gross Domestic Product ratio (BDGDP) and terms of trade (TOT) are specified in the model. The data used in running the regression in this study are secondary and were collected from various sources including the Ministry of Finance (MoF), Central Bank of Sierra Leone (CBSL), Sierra Leone Central Statistics Office (Statistics Sierra Leone), International Financial Statistics (IFS), World Development Indicators and World Debt Tables-Various Issues. The variables were tested for stationarity using unit root tests. The Autoregressive Distributed Lag (ARDL) approach was also employed in this study to ascertain both short run and long run relationships among the variables in the model. Diagnostic tests are variously carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically finds an inverse overlap thesis between colossal foreign debt burden and Sierra Leone’s economic growth for the period being investigated. This implies that high foreign debt burden is iniquitous to the country’s economic growth, in terms of both short run and long run growth trajectory, which corroborates the country’s debt “overhang” problem. The study, therefore, concludes that over the period under investigation, foreign debt burden has adversely affected economic growth in Sierra Leone, and hence proffers strategic recommendations, consistent with the findings obtained..