Effect of imf financing on economic growth a Sub-Saharan African perspective

Abstract

The study examined the effect of IMF financing on economic growth within the sub Saharan region and to ascertain whether multilateral aid played complementary role in driving growth of sub-Saharan African economies. The study employed explanatory research design, and fixed effect panel regression model to estimate the effects of multilateral aid and inflation over an annual period of 2000-2022 was used. Again, the study used secondary data mainly drawn from the World Bank (World Development Indicators, International Financial Statistics) and IMF (World Economic Outlook) 2023 online databases. The findings established a positive relationship between IMF financing on economic growth. The positive results show that, multilateral aid injections can act as an economic stimulus, particularly during periods of economic downturn whiles inflation posits a negative and insignificant relationship on economic growth. One major implication of the findings is that SSA countries have one way or the other benefited substantially from IMF aid. It is, therefore, important for these countries to develop stronger institutions that would attract more inflows from multilateral aids. In accessing the effect of inflation on economic growth, the study found that there is a negative and insignificant relationship between inflation and economic growth. This translates that, if inflation improves by a unit, it causes a decrease in economic growth. Though the study found an indirect relationship between inflation and economic growth, inflation determines how well an economy grows. Conversely, the inflation coefficient has a negative. This suggests that slower economic development and higher inflation rates are related.