Factors Affecting the External Debt-Servicing Capacity of African Nations: An Empirical Investigation

Abstract

While there have been a vast number of studies and international discussions on developing nations’ debt servicing capacity, not much attention has been focused on the African dimension. This article examines the determinants of debt reschedulings for forty-five African nations over the twelve-year period 1976 to 1987. A logit model of the macroeconomic variables affecting the probability of rescheduling is developed. The findings indicate that debt-service ratio, reserves to imports ratio, debt-service payments to capital inflow ratio, GDP growth rate, rate of domestic inflation, and net government deficit to GDP ratio are important indicators of debt servicing capacity. The overall results, while providing strong support for some of the often-mentioned causes of the African debt crisis, are seen to hold useful possibilities for both the debtor countries and international creditors.