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Sub-Saharan Africa's rising public debt stock: before another debt relief!

Author

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  • Olumide Olaoye

Abstract

Purpose - In light of the recent calls for another round of debt relief for African countries, by African finance ministers and governments, the aim of the study is twofold. First, the study examined the effect of public debt on macroeconomic performance. Two, the study also examined whether previous debt relief has impacted positively on sub-Saharan African economies. Design/methodology/approach - The study adopts the two-step system GMM that accounts for potential endogeneity and feedback effect in dynamic panel models. As robustness, the study performs the two-stage least square (2SLS) estimation method. Findings - The study reveals that previous debt relief programmes only had a marginal effect on economic growth in the region. The study found that corruption impacts negatively on the effectiveness of debt relief to achieve the desired economic outcomes. The study also found that sub-Saharan African economies seem to have shifted away from traditional concessional sources of financing towards market-based lenders dominated by China. Originality/value - The study adds to the growing evidence in the public debt literature by looking at the separate impact of domestic and foreign debts on macroeconomic indicators of economic growth, inflation, unemployment and exchange rate. The study also controlled for previous debt relief in light of the call for another round of debt relief. Graphical Abstract -

Suggested Citation

  • Olumide Olaoye, 2022. "Sub-Saharan Africa's rising public debt stock: before another debt relief!," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 14(1), pages 86-105, September.
    • Handle: RePEc:eme:ajemsp:ajems-03-2022-0105
    DOI: 10.1108/AJEMS-03-2022-0105
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    Citations

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    Cited by:

    1. Olumide O. Olaoye & O. J. Omokanmi & Mosab I. Tabash & S. O. Olofinlade & M. O. Ojelade, 2024. "Soaring inflation in sub-Saharan Africa: A fiscal root?," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 987-1009, February.
    2. Olumide Olusegun Olaoye, 2022. "Sub‐Saharan Africa's debt‐financed growth: How sustainable and inclusive?," African Development Review, African Development Bank, vol. 34(4), pages 443-458, December.

    More about this item

    Keywords

    Public debt; Debt relief; GMM; Corruption; E6; H5; H6;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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