Impact of External Debt, Capacity Utilization and Digital Infrastructural Architecture on National Savings in African Debt-Distressed Countries

Abstract

Purpose. This study examines the impact of external debt, capacity utilisation, and digital infrastructural architecture on national savings in African debt-distressed countries. It addresses a critical gap in the literature by providing a holistic empirical assessment of how debt dynamics, productive efficiency, and digital transformation jointly influence domestic resource mobilisation in vulnerable economies. Methods. The analysis employs panel data from 18 African debt-distressed countries covering 2011–2024. The panel system generalised method of moments (GMM) is used as the baseline estimator to address endogeneity and dynamic panel bias, while the threshold cross-sectionally augmented autoregressive distributed lag (CS-ARDL) model serves as a robustness check to capture short and long-run dynamics and cross-sectional dependence. The findings reveal that rising external debt measured through debt ratios, servicing obligations, and debt stock significantly reduces national savings in both the short and long run, reflecting fiscal crowding-out effects. Capacity utilisation indicators also exert a negative influence on savings, suggesting structural inefficiencies rather than productivity-enhancing expansion. Digital infrastructural architecture shows negative short-run effects on savings due to high investment costs and institutional constraints, though potential long-term benefits remain evident. Diagnostic tests confirm model validity and robustness. Significance. The results underscore the need for prudent debt management, productivity-oriented investment, and institutionally grounded digital infrastructure reforms to enhance national savings and strengthen macroeconomic resilience in African debt-distressed economies.