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Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead

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  • Mthuli Ncube
  • Zuzana Brixiová

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Abstract

The heightened interest of African countries to access international capital markets has put public debt sustainability once again high on the continent’s policy agenda. Applying the ‘stabilizing primary balance approach’ to sustainability shows 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 higher debt burdens, the balances were also above those needed to reduce public debt-to-GDP to sustainable thresholds. However, in most countries the main driver of sustainability has been the interest rate – growth differential (IRGD), underscoring the importance of maintaining and even accelerating growth as well as 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.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1053.

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Length: pages
Date of creation: 15 Jul 2013
Date of revision:
Handle: RePEc:wdi:papers:2013-1053

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Keywords: public debt; sovereign bonds; interest-growth differential; primary balance; Africa;

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References

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 573-78, May.
  2. Thomas Herndon & Michael Ash & Robert Pollin, 2013. "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp322, Political Economy Research Institute, University of Massachusetts at Amherst.
  3. Luc Eyraud & Anke Weber, 2013. "The Challenge of Debt Reduction during Fiscal Consolidation," IMF Working Papers 13/67, International Monetary Fund.
  4. Balazs Egert, 2013. "Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality," CESifo Working Paper Series 4157, CESifo Group Munich.
  5. Haizhou Huang & Danyang Xie, 2008. "Fiscal Sustainability and Fiscal Soundness," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 239-251, November.
  6. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
  7. Silvio Contessi, 2012. "An application of conventional sovereign debt sustainability analysis to the current debt crises," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 197-220.
  8. Charles Wyplosz, 2007. "Debt Sustainability Assessment: The IMF Approach and Alternatives," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 03-2007, Economics Section, The Graduate Institute of International Studies.
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Cited by:
  1. Mthuli Ncube & Zuzana Brixiova, 2013. "Working Paper 188 - Remittances and their Macroeconomic Impact: Evidence from Africa," Working Paper Series, African Development Bank 996, African Development Bank.

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