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Public debts, fiscal balance and sustainability: What can African governments learn from debt sustainability models?

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  • Gladys A. Abindaw Nabieu
  • Michael Minlah
  • David Mensah

Abstract

This paper examines the impact of public debt on fiscal balance. This study uses the standard debt equation in a fiscal reaction and impulse response functions framework to assess the trajectory of public debt and its sustainability within the Sub-Sahara region from 1980–2017. From the estimations of the fiscal reaction function, the lagged primary balance significantly affects the fiscal deficits of Sub-Saharan African countries. Also, public debts to the gross domestic product beyond a threshold of fifty percent are positive and significantly associated with the primary balance. Fiscal deficits contribute to increases in the debt stock of about 120% over the ten-year for the Sub-Sahara region. The results imply that fiscal governance is required to constrict fiscal deficits whenever debt stock levels approach a certain threshold and growth. Therefore, stakeholders should implement enhanced fiscal policy rules on fiscal balance, public debts, and economic growth to improve debt sustainability.

Suggested Citation

  • Gladys A. Abindaw Nabieu & Michael Minlah & David Mensah, 2023. "Public debts, fiscal balance and sustainability: What can African governments learn from debt sustainability models?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2235827-223, June.
    • Handle: RePEc:taf:oaefxx:v:11:y:2023:i:2:p:2235827
    DOI: 10.1080/23322039.2023.2235827
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