The Role of External Finance in Promoting Economic Growth Under Corruption: Evidence from Sub-Saharan Africa

By: Edidiong Okon Amos, Chinyere Grace Chukwu, Victoria Nse Asukwo

Pages: 322–346, Volume: 2, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 9/1/2025, 2025

ISSN (Electronic): 2536-6742

DOI: 10.48028/iiprds/aefunaijefds.v2.i2.17

The Role of External Finance in Promoting Economic Growth Under Corruption: Evidence from Sub-Saharan Africa

Abstract:

The effectiveness of external finance on economic growth has been subjected to intense debate, with most studies focusing on specific external finance that are likely to provide myopic conclusions on the implications of external finance on economic growth. However, aggregating external finance with the recipient’s corruption level is most likely to provide robust insight into the impact of external finance on economic growth. Thus, this paper investigates whether external finance propels economic growth amidst corruption in 18 Sub-Saharan Africa (SSA) countries from 2000 to 2023 using the feasible generalized least squares (FGLS) econometrics technique. The empirical findings reveal that human capital, foreign aid, and foreign direct investment enhance economic growth while remittance inEow dampens economic growth in the region. Similarly, corruption impedes economic growth in the region and also inhibits the growth-enhancing impact of foreign aid. In other words, foreign aid does not propel economic growth in SSA amidst corruption. Hence, it becomes apparent for SSA to implement strategies that will help curb the regional corruption in order to achieve rapid economic growth.

Keywords: External finance, Corruption, Economic growth, Sub-Saharan Africa, Institutional quality