Analysis of public debt trends and poverty reduction in Malawi

How are poverty and debt related in the short run and long run in the context of a developing economy, such as Malawi? The novelty of the study is that it uses a unique data set spanning from 1983 to 2021 to examine the relationship between poverty and public debt in Malawi. The auto-regressive distributed lag (ARDL) model was employed in the study. Primary research findings revealed a positive relationship between public debt and poverty, both in the short run and the long run. An increase in public debt of 1% led to an increase in poverty levels by 37% in the short run and by 33% in the long run. These results imply that Malawi should address high public debt levels so as to improve the chances of attaining Sustainable Development Goal 1 of poverty reduction. In terms of policy recommendations, it was suggested that Malawi needs to develop an effective debt service plan and prioritize social security programs so that poverty levels are ultimately reduced.