The main purpose of this study is to identify the determinants of the external debt service and decisive impacts in Ethiopia. The annual time series data span from 1987/88 to 2021/22 EFY is used. Based on criteria of pre-estimation and ability to capture dynamism among the variables the study used Auto Regressive and Distributed Lag model (ARDL). The finding shows that; the nature of external debt service of Ethiopia is fluctuate overtime due to varies factors. Incorporated variables in the model are RGDP, consumer price index, current account balance, trade openness, total export of goods and service, real effective exchange rate, government effectiveness and external debt. The result of ARDL estimation model reveals that consumer price index and external debt have negative impacts on external debt service of Ethiopia. While, real gross domestic product and trade openness has positive impacts on debt repayment of Ethiopia. Implication of positive trade openness and economic growth indicate that having out and in ward with international trading partner also having improved infrastructural development are important to make easy external debt service of Ethiopia. It makes easy to attract foreign direct investment and sustainable economic growth. Contrary, higher inflation and higher external debt has leads discourage the inflow of FDI or business activity. The findings suggest that; the need to curb inflation and having not much external debt as well promoting investment on production of exportable goods and service sectors that generate foreign currency is making easy to repay external debt of Ethiopia.
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