On The Impact Of External Debt And Aid On Public Expenditure Allocation In Sub-Saharan Africa After The Launch Of The Hipc Initiative
In the wake of the current financial and economic crises, the economies of Sub-Saharan Africa (SSA) find themselves squeezed between likely reductions in Official Development Assistance (ODA) and the pressing challenge to eradicate poverty. Public expenditure allocation to the social sector and to public investment is constrained by the need to pursue fiscal discipline, in order to avert debt distress. Within a framework of public expenditure choice (based on Fosu, 2007, 2008, 2010), the paper investigates the impact of the external debt-servicing constraint and external aid on government expenditure allocation in SSA countries after the launch of the HIPC initiative. Three-year panel over 1995-2009 for 40 low- and low-middle income SSA economies, of which 29 are HIPC, is used for the analysis. The findings suggest that the debt effect, while substantially lower than existing estimates for the pre-HIPC period, remains negative for the social sector, with education expenditure suffering the most from higher actual or predicted constraint-consistent debt servicing. ODA, particularly multilateral aid, has a significant positive effect on public investment. Moreover, recent relatively low levels of debt seem temporary and low-income countries are likely to contract additional debt to fill their funding gaps. This calls for appropriate measures, to be undertaken in order to prevent the deleterious effects of debt, especially on the social sector. The additional finding that government effectiveness favors public investment and spending in the social sector suggests that increased attention on governance is called for.
|Date of creation:||2012|
|Contact details of provider:|| Web page: http://www.iaae-agecon.org/|
More information through EDIRC
References listed on IDEAS
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.:
- Mwangi S. Kimenyi, 2006.
"Ethnicity, Governance and the Provision of Public Goods,"
Journal of African Economies,
Centre for the Study of African Economies (CSAE), vol. 15(1), pages 62-99, April.
- Mwangi S. Kimenyi, 2003. "Ethnicity, Governance and the Provision of Public Goods," Working papers 2003-49, University of Connecticut, Department of Economics.
- Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2008.
"Does Aid for Education Educate Children? Evidence from Panel Data,"
World Bank Economic Review,
World Bank Group, vol. 22(2), pages 291-314, April.
- Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2006. "Does aid for education educate children? Evidence from panel data," Kiel Working Papers 1290, Kiel Institute for the World Economy (IfW).
- Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006. "Does Aid for Education Educate Children? Evidence from Panel Data," KOF Working papers 06-146, KOF Swiss Economic Institute, ETH Zurich.
- Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2008. "Does Aid for Education Educate Children? Evidence from Panel Data," Open Access Publications from Kiel Institute for the World Economy 28827, Kiel Institute for the World Economy (IfW).
- Eduardo Lora & Mauricio Olivera, 2006.
"Public Debt and Social Expenditure: Friends or Foes?,"
Research Department Publications
4465, Inter-American Development Bank, Research Department.
- Lora, Eduardo & Olivera, Mauricio, 2007. "Public debt and social expenditure: Friends or foes?," Emerging Markets Review, Elsevier, vol. 8(4), pages 299-310, December.
- Eduardo Lora & Mauricio Olivera, 2006. "Public Debt and Social Expenditure: Friends or Foes?," IDB Publications (Working Papers) 43578, Inter-American Development Bank.
- Clémence VERGNE, 2006.
"Democracy, Elections and Allocation of Public Expenditure in Developing Countries,"
- Vergne, Clémence, 2009. "Democracy, elections and allocation of public expenditures in developing countries," European Journal of Political Economy, Elsevier, vol. 25(1), pages 63-77, March.
- Clémence Vergne, 2011. "Democracy, Elections and Allocation of Public Expenditure in Developing Countries," Working Papers halshs-00564572, HAL.
- Mark E Schaffer & Steven Stillman, 2006. "XTOVERID: Stata module to calculate tests of overidentifying restrictions after xtreg, xtivreg, xtivreg2, xthtaylor," Statistical Software Components S456779, Boston College Department of Economics, revised 05 Jan 2016.
- Augustin Fosu, 2010.
"The External Debt-Servicing Constraint and Public-Expenditure Composition in Sub-Saharan Africa,"
African Development Review,
African Development Bank, vol. 22(3), pages 378-393.
- Fosu, Augustin, 2010. "The external debt-servicing constraint and public-expenditure composition in sub-Saharan Africa," MPRA Paper 39238, University Library of Munich, Germany.
- Murthy, Vasudeva N.R. & Okunade, Albert A., 2009. "The core determinants of health expenditure in the African context: Some econometric evidence for policy," Health Policy, Elsevier, vol. 91(1), pages 57-62, June.
- Rajkumar, Andrew Sunil & Swaroop, Vinaya, 2008. "Public spending and outcomes: Does governance matter?," Journal of Development Economics, Elsevier, vol. 86(1), pages 96-111, April.
- Clémence Vergne, 2009. "Democracy, elections and allocation of public expenditures in developing countries," Post-Print hal-00368509, HAL.
- Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LP, number imeus, September.
- Leonardo Hernández & Boris Gamarra, 2010. "Debt Sustainability and the Ongoing Financial Crisis: The Case of IDA-only African Countries," African Development Review, African Development Bank, vol. 22(3), pages 419-439.
- Mahdavi, Saeid, 2004. "Shifts in the Composition of Government Spending in Response to External Debt Burden," World Development, Elsevier, vol. 32(7), pages 1139-1157, July.
- 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.
- Clara Delavallade, 2006. "Corruption and distribution of public spending in developing countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 30(2), pages 222-239, June.
- Augustin Kwasi Fosu, 2010. "The Global Financial Crisis and Development: Whither Africa?," WIDER Working Paper Series 124, World Institute for Development Economic Research (UNU-WIDER).
- Glick, Peter & Sahn, David E., 2006. "The demand for primary schooling in Madagascar: Price, quality, and the choice between public and private providers," Journal of Development Economics, Elsevier, vol. 79(1), pages 118-145, February.
- Augustin Kwasi Fosu, 2008. "Implications of the External Debt-servicing Constraint for Public Health Expenditure in Sub-Saharan Africa," Oxford Development Studies, Taylor & Francis Journals, vol. 36(4), pages 363-377.
- Philip Keefer & Stephen Knack, 2007. "Boondoggles, Rent-Seeking, and Political Checks and Balances: Public Investment under Unaccountable Governments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 566-572, August.
When requesting a correction, please mention this item's handle: RePEc:ags:iaae12:126879. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.