MANAGING THE DEBT PROFILE IMPACT ON HUMAN DEVELOPMENT IN WEST AFRICAN MONETARY ZONE: TO WHAT DEGREE HAS THE THRESHOLD BEEN EXCEEDED?

Abstract This study focused on the effect of external debt burden on human development index among the West African Monetary Zone countries. It sought to assess the significance of external debt burden, and to suggest measures that could enhance its effectiveness and human development in West African Monetary Zone. To achieve the objective of the research, some macroeconomic and human development indicators, using the ex-post facto research design was applied. The population and the sample size of the study comprised of six (6) ECOWAS countries that make up the West African Monetary Zone. The data were collated, analyzed and tested using descriptive statistics, country-specific and the panel data ARDL analysis techniques. From the analysis, it was revealed that external debt service payment and external debt both significantly affect human development index though adversely in the Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone. This implies that education, health and per capital income which are the components of the Human Development Index (HDI) deteriorates as the level of revenue that goes to debt servicing gets higher. This also happens as more debts are contracted especially above the size of most West African Monetary Zone member economies. Based on the findings, the study recommended that the external debt thresholds should be considered by the Ghanaian economy when formulating their external debt management policies, thereby reducing their reliance on external debt funds. Domestically generated revenue, especially tax revenue, should be revamped and galvanized, in such a way that tax avoidance and evasion would be reduced drastically, to bridge the resulting gap in expenditure. Also, to mitigate the adverse effect of external debt and its corresponding payment obligation, the Nigerian government should sort for loans with favourable terms and conditions after a rigorous evaluation, not on exigency, to reduce the cost of the debt. A well-developed capital market will reduce the rate of external borrowing.