Impact of External Debt and Energy Consumption on Environmental Quality in Somalia

ABSTRACT
This study investigates the interconnections between external debt, energy consumption, industrialization, and environmental quality in Somalia over the period 1990-2019, utilizing the ARDL bounds testing approach. Notably, a positive correlation is found between energy consumption and CO2 emissions, emphasizing the imperative for sustainable practices. In the long run, external debt is observed to have an insignificant impact on environmental quality, suggesting a strategic opportunity for policymakers to channel external funds towards environmentally sustainable projects. Short-term strategies underscore the positive link between decreased industrialization and improved environmental quality, while a
cautious approach to external debt is crucial due to its short-term negative impact. The significance of the error correction term underscores the need for adaptive policies. Overall, the study advocates for comprehensive policies integrating sustainable practices and directing external financing towards eco-friendly projects, alongside a capacity building and technology transfer partnerships for environmentally conscious development in Somalia.

Keywords: External Debt, Energy Consumption, Industrialization, CO2 , Autoregressive Distributed Lag
JEL Classifications: P18, F64, H63