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Public Debt Accumulation in SSA: A Looming Debt Crisis
[‘Government Ponzi Games and the Sustainability of Public Deficits Under Uncertainty’]

Author

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  • Michael Atingi-Ego
  • Sayed Timuno
  • Tiviniton Makuve

Abstract

This paper discusses recent debt trends and evaluates performance of debt sustainability analysis (DSA) conducted in a sample of Sub-Saharan African (SSA) countries over the period 2008–16. Based on qualitative and quantitative analyses, the findings suggest the existence of systematic optimism bias in past DSA vintages resulting from optimistic macro-economic projections that underpin the DSAs. As a result, the DSAs for the sample countries analysed projected higher debt carrying capacities, which in most cases led to a faster pace of debt accumulation during this period. Moreover, this was not helped by the fact that average interest rates on new debt commitments were rising faster relative to gross domestic product growth rates, while the necessary fiscal adjustment to counter this development remained insufficient. Countercyclical policies supported by fiscal buffers that were used to address the impact of the 2008 global financial crisis have largely not been reversed despite the erosion of the buffers and a pick-up in growth in some countries. As a result, the overall risk of debt distress in the region has deteriorated in the past decade. Going forward, strengthening analytical/research work on country macroeconomic projections underlying their DSAs, relationship between investment and growth, impact of natural disasters on DSA frameworks and quantifying and monitoring fiscal risks would be important pieces of work in leveraging DSA results for financing and policy decisions. Other supporting issues to embrace include capacity building to enhance quality of policies, transparency and accountability at institutional level; managing roll over risk; developing and implementing sound debt management strategies.

Suggested Citation

  • Michael Atingi-Ego & Sayed Timuno & Tiviniton Makuve, 2021. "Public Debt Accumulation in SSA: A Looming Debt Crisis [‘Government Ponzi Games and the Sustainability of Public Deficits Under Uncertainty’]," Journal of African Economies, Centre for the Study of African Economies, vol. 30(Supplemen), pages 103-139.
    • Handle: RePEc:oup:jafrec:v:30:y:2021:i:supplement_1:p:i103-i139.
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    References listed on IDEAS

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    1. Mr. Henry Mooney & Constance de Soyres, 2017. "Debt Sustainability Analyses for Low-Income Countries: An Assessment of Projection Performance," IMF Working Papers 2017/220, International Monetary Fund.
    2. Paul Beaudry & Tim Willems, 2022. "On the Macroeconomic Consequences of Over-Optimism," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 38-59, January.
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    Cited by:

    1. Badru, Ruth & Calef, Andrea & Ilori, Ayobami E. & Omoju, Oluwasola E., 2025. "Fiscal consolidation and asymmetric macroeconomic effects: Evidence from Sub-Saharan African countries," Economic Modelling, Elsevier, vol. 147(C).
    2. Apeti, Ablam Estel & Obeng, Samuel & Tagem, Abrams & Were, Maureen, 2025. "Sovereign Default and Public Debt: What role for Fiscal Rules?," The Warwick Economics Research Paper Series (TWERPS) 1567, University of Warwick, Department of Economics.
    3. Daniel Tang & Haruna Issahaku, 2024. "Public debt and unemployment in Sub-Saharan Africa: the role of institutional framework," SN Business & Economics, Springer, vol. 4(3), pages 1-26, March.
    4. Kodongo, Odongo, 2025. "Sovereign debt sustainability and private sector credit in Kenya," KBA Centre for Research on Financial Markets and Policy Working Paper Series 90, Kenya Bankers Association (KBA).
    5. Baah Aye Kusi & Joseph Atta Junior Darkwa & Peter Kobati Ayiakwo & Joseph Ato Forson & Michael Awuku & Moses Nanyun Nankpan, 2025. "IMF programme duration and fiscal policy: a path to debt sustainability in Africa," SN Business & Economics, Springer, vol. 5(5), pages 1-23, May.
    6. Gabriel Temesgen Woldu & Izabella Szakálné Kanó, 2024. "Primary surplus dynamics and fiscal sustainability in sub-saharan African countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 499-519, July.
    7. Okere, Kingsley Ikechukwu & Dimnwobi, Stephen Kelechi & Ekesiobi, Chukwunonso & Onuoha, Favour Chidinma, 2023. "Turning the tide on energy poverty in sub-Saharan Africa: Does public debt matter?," Energy, Elsevier, vol. 282(C).

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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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