The external debt-servicing constraint and public-expenditure composition in sub-Saharan Africa
AbstractIn the light of the current global financial and economic crises, how would governments in sub-Saharan Africa (SSA) allocate their budgets across sectors in response to a binding debt-servicing constraint? Within a framework of public-expenditure choice, the present paper estimates constraint-consistent debt-service ratios and employs them in Seemingly Unrelated Regression involving five-year panel for up to 35 African countries over 1975-94, a period preceding the Highly Indebted Poor Countries (HIPC) initiatives. While observed debt service is found to be a poor predictor of expenditure allocation, constraining debt servicing shifts spending away from the social sector, with similar impacts on education and health. The implied partial elasticity of the sector’s expenditure share with respect to debt is estimated at 1.5, the highest responsiveness by far among all the explanatory variables considered, including external aid. Thus, if the social sector is to be protected, sufficient debt relief for SSA countries should be pursued.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39238.
Date of creation: 2010
Date of revision:
Publication status: Published in African Development Review 3.22(2010): pp. 378-393
Debt-servicing constraint; public-expenditure composition; sub-Saharan Africa;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven G. Craig & Robert P. Inman, 1986.
"Education, Welfare, and the "New" Federalism: State Budgeting in a Federalist Public Economy,"
NBER Working Papers
1562, National Bureau of Economic Research, Inc.
- Steven Craig & Robert P. Inman, 1986. "Education, Welfare and the “New” Federalism: State Budgeting in a Federalist Public Economy," NBER Chapters, in: Studies in State and Local Public Finance, pages 187-228 National Bureau of Economic Research, Inc.
- Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
- Benedict J. Clements & Sanjeev Gupta & Emanuele Baldacci & Carlos Mulas-Granados, 2002. "Expenditure Composition, Fiscal Adjustment, and Growth in Low-Income Countries," IMF Working Papers 02/77, International Monetary Fund.
- Joshua Greene, 1989. "The External Debt Problem of Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 836-874, December.
- Cashel-Cordo, P. & Craig, S.G., 1988.
"The Public Sector Impact Of International Resource Transfers,"
24, Houston - Department of Economics.
- Cashel-Cordo, Peter & Craig, Steven G., 1990. "The public sector impact of international resource transfers," Journal of Development Economics, Elsevier, vol. 32(1), pages 17-42, January.
- Habibi, Nader, 1994. "Budgetary policy and political liberty: A cross-sectional analysis," World Development, Elsevier, vol. 22(4), pages 579-586, April.
- Augustin Kwasi Fosu, 2008. "Implications of the External Debt-servicing Constraint for Public Health Expenditure in Sub-Saharan Africa," Oxford Development Studies, Taylor and Francis Journals, vol. 36(4), pages 363-377.
- Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-45, June.
- Fosu, Augustin Kwasi, 2007. "Fiscal Allocation for Education in Sub-Saharan Africa: Implications of the External Debt Service Constraint," World Development, Elsevier, vol. 35(4), pages 702-713, April.
- Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November.
- Goel, Rajeev K & Nelson, Michael A, 1998. " Corruption and Government Size: A Disaggregated Analysis," Public Choice, Springer, vol. 97(1-2), pages 107-20, October.
- Fielding, David, 1997. "Modelling the Determinants of Government Expenditure in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 377-90, October.
- Quattri, Maria & Fosu, Augustin Kwasi, 2012.
"On the Impact of External Debt and Aid on Public Expenditure Allocation in Sub-Saharan Africa after the Launch of the HIPC Initiative,"
UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Quattri, Maria A. & Fosu, Augustin Kwasi, 2012. "On The Impact Of External Debt And Aid On Public Expenditure Allocation In Sub-Saharan Africa After The Launch Of The Hipc Initiative," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126879, International Association of Agricultural Economists.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.