External Debt Sustainability and Economic Performance in Bangladesh: A Cointegration Analysis

For developing countries, debt management tactics are appearing as a key challenge under particular fiscal constraints. This paper explores the long-run association between external debt servicing (EDS) and economic growth in Bangladesh using World Development Indicators (WDI) data from 1973 to 2020. Utilising Augmented Dickey-Fuller (ADF) unit root tests, Johansen cointegration analysis, and Vector Error Correction Modelling (VECM), the study demonstrates a statistically significant positive correlation (β = 0.125, SE = 0.029, p < 0.01), indicating that a 1% increase in EDS results in a 0.125% increase in GDP growth. These results suggest that proficient EDS management can facilitate enduring economic growth. The consequences of the study and internal debt allocation in Bangladesh postulate empirical evidence for policymakers in developing economies, highlighting the importance of the strategic and productive use of external debt to support long-term growth. JEL Classification: E01, E63, F43, E62, H63