Macroeconomic Determinants of Public Debt in Tanzania: Empirical Evidence and lessons for Post COVID-19 Recovery

Abstract

This study examines the macroeconomic determinants of public debt in Tanzania for the 1970-2019 period employing the ARDL model.  The estimated results from the ARDL bound test reveal the presence of co-integration amongst the macroeconomic determinants of public debt. Moreover, in the short run, the ARDL shows that there is significant evidence that imports and government spending positively affect public debt while inflation rate affects public debt negatively, and the effect of foreign direct investment on public debt is statistically indistinguishable from zero. The study recommends that the governments of Tanzania should pursue sound macroeconomic policies that reduce public debt, while at the same time ensuring that resources are directed towards productive sectors of the economy in order to boost domestic production and increased revenue and export performance during the post- COVID 19.