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The role of COVID‐19 in worsening the debt sustainability in developing economies – The case of Ghana and Kenya

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  • Senanu Kwasi Klutse
  • Judit Sági
  • Gábor Dávid Kiss

Abstract

The SARS‐CoV‐2 coronavirus pandemic has raised public debt sustainability issues, especially for Heavily Indebted Poor Countries (HIPC). Developing countries with limited fiscal space have had to take on significant external debts to help deal with the negative effects of the pandemic. This has led to further increases in the debt levels of these countries, with the potential to trigger a debt default. Addressing these issues, this study uses a framework for fiscal policy and public debt sustainability analysis. The results confirm the impact of the SARS‐CoV‐2 coronavirus pandemic on the debt levels of Ghana and Kenya. This study recommends the creation of domestic fiscal buffers and fiscal space toward the attainment of long‐term debt sustainability, contrary to the popular view of offering debt relief to these countries. La pandemia de coronavirus SARS‐CoV‐2 ha planteado problemas de sostenibilidad de la deuda pública, especialmente para los Países Pobres Muy Endeudados (PPME). Los países en desarrollo con un espacio fiscal limitado han tenido que contraer importantes deudas externas para ayudar a hacer frente a los efectos negativos de la pandemia. Esto ha dado lugar a nuevos aumentos de los niveles de deuda de estos países, con el potencial de desencadenar un impago de la deuda. Para abordar estas cuestiones, este estudio utiliza un marco para el análisis de la política fiscal y la sostenibilidad de la deuda pública. Los resultados confirman el impacto de la pandemia de coronavirus SARS‐CoV‐2 en los niveles de deuda de Ghana y Kenia. Este estudio recomienda la creación de amortiguadores fiscales domésticos y espacios fiscales para lograr la sostenibilidad de la deuda a largo plazo, contrariamente a la opinión popular de ofrecer un alivio de la deuda a estos países. 新型コロナウイルスのパンデミックは、重債務貧困国を中心に、公的債務の持続可能性の問題を提起した。財政余力がない発展途上国は、パンデミックの悪影響に対処するために多額の対外債務を引き受けなければならなかった。これにより、債務レベルはさらに引き上げられ、債務不履行を引き起こす可能性がある。この問題に対処するため、本研究では財政政策と公的債務の持続可能性の分析の枠組みを使用した。結果から、新型コロナウイルスのパンデミックがケニヤの債務レベルに与えた影響が確認された。結果から、これらの国に債務救済を提供するという一般的な見方とは異なり、長期的な債務の持続可能性の達成のために国内の財政バッファーと財政余力を構築することが推奨される。

Suggested Citation

  • Senanu Kwasi Klutse & Judit Sági & Gábor Dávid Kiss, 2023. "The role of COVID‐19 in worsening the debt sustainability in developing economies – The case of Ghana and Kenya," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(6), pages 1259-1275, August.
    • Handle: RePEc:bla:rgscpp:v:15:y:2023:i:6:p:1259-1275
    DOI: 10.1111/rsp3.12676
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