Political stability and fiscal consolidation in sub‐Saharan African countries

Fiscal policy decision‐making in sub‐Saharan African countries has not always been understood, and the existing literature has generally emphasised the role of macroeconomic factors to justify government fiscal performances. This study highlights the essential role of political stability in the fiscal consolidation decision‐making process in sub‐Saharan African countries. We perform a panel logit model for twenty‐seven (27) sub‐Saharan African countries for the period 2000–15. We show that government stability increases the likelihood of fiscal consolidation as measured by the improvement in the cyclically adjusted primary balance (CAPB). This finding shows that governments that face less risk of being overthrown and enjoy institutional support from the political arena are more prone to fiscal consolidation. This result is obtained by examining different aspects of political stability, including government cohesion, popular support, legislative strength, margin of majority and legislative fractionalisation. Moreover, disaggregating fiscal policy into spending and revenue‐based strategies allows us to show that spending‐based consolidation tends to be more significantly associated with government stability than revenue‐based consolidation. Our findings are supported by various robustness checks and contribute to the ongoing efforts in sub‐Saharan countries to enhance sound fiscal policy.