Is Concessional Debt More Conducive to Economic Growth Than Non‐Concessional Debt for Countries in the West African Economic and Monetary Union (WAEMU)?

ABSTRACT This article compares the effects of concessional debt and non‐concessional debt on economic growth in WAEMU countries over the period 1975–2022, using the ARDL and system GMM approaches. Unlike conventional aggregate analyses, the results show that both types of debt exert a positive and significant long‐term effect on GDP per capita. The GMM estimator reveals that in the short‐to‐medium term (annual data), concessional debt exerts a positive and statistically significant effect on economic growth (0.6%–0.8% marginal effect on GDP level, and 0.07%–0.09% on the growth rate), while non‐concessional debt lacks statistical significance on the real growth rate. However, when filtering out cyclical fluctuations through 5‐year non‐overlapping averages and within the long‐term ARDL framework, Wald tests show that the efficiency gap between the two debt instruments ceases to be statistically significant, indicating a long‐term convergence in their structural effect on the GDP per capita level. Furthermore, Hansen's (1999) linearity tests reject the existence of a significant saturation threshold, confirming the linearity of the relationship over the period studied. Finally, the findings highlight that access to the international financial market (Eurobonds) coexists with concessional debt flows without causing structural degradation or clear synergy. These conclusions suggest that debt efficiency is dictated by the nature of the creditor and advocate for prioritizing concessional financing coupled with technical conditionalities.