The Effects of Natural Resource Exploitation on External Debt Dependence in Africa: Does the Extractive Industries Transparency Initiative Play a Role?

ABSTRACT The relationship between natural resource exploitation and external debt dependency remains understudied. This study addresses this knowledge gap by analyzing the impact of natural resource extraction on external debt in 43 African countries over the period 2006–2021. Employing the generalized method of moments (GMMs) technique, the study reveals a natural resource curse, where increased natural resource exploitation leads to higher external debt dependency. However, the findings also suggest that membership in the Extractive Industries Transparency Initiative (EITI) can mitigate this effect, reducing the likelihood of external debt dependency. The study's results underscore the importance of African governments strengthening their commitment to EITI, a crucial policy tool for breaking the natural resource curse and promoting sustainable economic development.