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As You sow so Shall You Reap; Public Investment Surges, Growth, and Debt Sustainability in togo

Author

Listed:
  • Antonio David
  • Luis-Felipe Zanna
  • Raphael A Espinoza
  • Michal Andrle
  • Marshall Mills

Abstract

This paper presents an analysis of the public investment scaling-up strategy for Togo using a dynamic macroeconomic model that explicitly analyzes the links between public investment, economic growth, and debt sustainability. In the model, public capital is productive and complementary to private capital, generating positive medium and long-run effects to increases in public investment. The model application indicates that a very large increase in public investment would have positive macroeconomic effects in the long-run, but would require unrealistic increases in the tax burden to cover recurrent costs and ensure debt sustainability. More modest increases in public investment would require more feasible increases in the tax burden, particularly if the efficiency of tax collection is improved. The model simulations also emphasize the importance of improvements in the efficiency of public investment to reap welfare gains. However, even if the macroeconomic implications of public investment scaling-up can be favorable in the long-run under certain assumptions on rates of return and efficiency of investment, the transition period is challenging and exposes the country to increased risk of unsustainable debt dynamics. The model was also used to assess the growth projections underlying the standard Excel-based debt sustainability analysis for Togo.

Suggested Citation

  • Antonio David & Luis-Felipe Zanna & Raphael A Espinoza & Michal Andrle & Marshall Mills, 2012. "As You sow so Shall You Reap; Public Investment Surges, Growth, and Debt Sustainability in togo," IMF Working Papers 12/127, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/127
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    References listed on IDEAS

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    1. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, vol. 17(3), pages 235-266, September.
    2. Andrew Berg & Rafael A Portillo & Edward F Buffie & Catherine A Pattillo & Luis-Felipe Zanna, 2012. "Public Investment, Growth, and Debt Sustainability; Putting together the Pieces," IMF Working Papers 12/144, International Monetary Fund.
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    Citations

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    Cited by:

    1. Matteo Ghilardi & Sergio Sola, 2015. "Investment Scaling-up and the Role of Government; the Case of Benin," IMF Working Papers 15/69, International Monetary Fund.
    2. Andrew Berg & Rafael A Portillo & Edward F Buffie & Catherine A Pattillo & Luis-Felipe Zanna, 2012. "Public Investment, Growth, and Debt Sustainability; Putting together the Pieces," IMF Working Papers 12/144, International Monetary Fund.
    3. Salifou Issoufou & Edward F Buffie & Mouhamadou Bamba Diop & Kalidou Thiaw, 2014. "Efficient Energy Investment and Fiscal Adjustment in Senegal," IMF Working Papers 14/44, International Monetary Fund.
    4. Yibin Mu, 2012. "Striking an Appropriate Balance Among Public Investment, Growth, and Debt Sustainability in Cape Verde," IMF Working Papers 12/280, International Monetary Fund.
    5. Michele Andreolli & Aidar Abdychev, 2016. "Investing in Electricity, Growth, and Debt Sustainability; The Case of Lesotho," IMF Working Papers 16/115, International Monetary Fund.
    6. Cavalcanti, Carlos B. & Marrero, Gustavo A. & Le, Tuan Minh, 2014. "Measuring the impact of debt-financed public investment," Policy Research Working Paper Series 6766, The World Bank.

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