Effect of external debt on economic growth of rwanda

The objective of this study was to investigate the effect of external debt on the economic growth of Rwanda. The empirical literature review reveals that external debt may have a positive or negative impact. Most of previous studies did not focus on factors which explain the negative or positive effect of external debt.Findings of this study revealed that in Rwanda, external debt has a positive impact on the economic growth thanks to good management of external debt. Government of Rwanda has set and implemented development strategies which determine priorities in terms of funding which explains its positive effect as compared to findings from some other least developed countries. Indeed, It has been noticed that the variable external debt has an effect on LGDP as its estimated coefficients are statistically significant at 10% level of confidence; its probability is less than 0.1. Furthermore, the coefficients related to external debt is positively correlated to the GDP. When LEXDEBT increases by 1%, the LGDPCP increases by 0.068. This research is a contribution to a bulk of knowledge. It ends at conclusion that for external debt to have positive impact on the economic growth, it has to be embodied into development strategies and always be contracted on the basis of specific development strategies to be financed.