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Working Paper 227 - Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead

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  • Mthuli Ncube
  • Zuzana Brixiova

Abstract

The increased access of African countries to international capital markets has put public debt sustainability once again high on the continent’s policy agenda. Utilizing the ‘stabilizing primary balance’ approach, we find that the primary balances exceeded those required to keep public debt at the 2007 level in about half of the countries studied. In several cases with high debt burdens, the balances were above those needed to reduce public debt-to-GDP to sustainable thresholds. In most countries the main driver of sustainability has been the interest rate – growth differential (IRGD), underscoring the importance of supporting growth and utilizing the borrowing space for growth-enhancing outlays. Fiscal policies will need to play a greater role in maintaining debt sustainability in the future, especially since the IRGDs are likely to narrow over the longer term. The recent developments such as the fall of the commodity prices and uneven global growth further underscore the need for sound macroeconomic and risk management.

Suggested Citation

  • Mthuli Ncube & Zuzana Brixiova, 2015. "Working Paper 227 - Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead," Working Paper Series 2170, African Development Bank.
    • Handle: RePEc:adb:adbwps:2170
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    2. Ribeiro, Ana Paula & Carvalho, Vitor & Sanches, Hélder, 2021. "Debt dynamics and fiscal policy stance in Cape Verde: Is there evidence of pro-cyclical behavior?," MPRA Paper 111305, University Library of Munich, Germany.
    3. Okwoche Princewill U. & Iheonu Chimere O., 2021. "Determinants of fiscal effort in sub-Saharan African countries: Does conflict matter?," Economics and Business Review, Sciendo, vol. 7(2), pages 50-73, June.
    4. Benjamin Musiita & Fredrick Nsambu Kijjambu & Asaph Kabuura Katarangi & Geoffrey Kahangane & Sheilla Akampwera, 2023. "Uganda’s Debt Sustainability: Testing The Efficacy of Debt Overhang Theory," Journal of Economics and Behavioral Studies, AMH International, vol. 15(4), pages 37-54.
    5. António Afonso, & Emanuel Reis Leão, & Dilson Tiny, & Diptes C. P. Bhimjee, 2017. "Fiscal Sustainability Analysis: The Case of PALOP Economies," Working Papers Department of Economics 2017/14, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    6. Florence Dafe & Dennis Essers & Ulrich Volz, 2018. "Localising sovereign debt: The rise of local currency bond markets in sub‐Saharan Africa," The World Economy, Wiley Blackwell, vol. 41(12), pages 3317-3344, December.
    7. Misheck Mutize & Sean J. Gossel, 2019. "Sovereign Credit Rating Announcement Effects on Foreign Currency Denominated Bond and Equity Markets in Africa," Journal of African Business, Taylor & Francis Journals, vol. 20(1), pages 135-152, January.

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