The external debt-servicing constraint and public-expenditure composition in sub-Saharan Africa
In the light of the current global financial and economic crises, how would governments in sub-Saharan Africa (SSA) allocate their budgets across sectors in response to a binding debt-servicing constraint? Within a framework of public-expenditure choice, the present paper estimates constraint-consistent debt-service ratios and employs them in Seemingly Unrelated Regression involving five-year panel for up to 35 African countries over 1975-94, a period preceding the Highly Indebted Poor Countries (HIPC) initiatives. While observed debt service is found to be a poor predictor of expenditure allocation, constraining debt servicing shifts spending away from the social sector, with similar impacts on education and health. The implied partial elasticity of the sector’s expenditure share with respect to debt is estimated at 1.5, the highest responsiveness by far among all the explanatory variables considered, including external aid. Thus, if the social sector is to be protected, sufficient debt relief for SSA countries should be pursued.
|Date of creation:||2010|
|Date of revision:|
|Publication status:||Published in African Development Review 3.22(2010): pp. 378-393|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- 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.
- Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November.
- Cashel-Cordo, Peter & Craig, Steven G., 1990.
"The public sector impact of international resource transfers,"
Journal of Development Economics,
Elsevier, vol. 32(1), pages 17-42, January.
- Cashel-Cordo, P. & Craig, S.G., 1988. "The Public Sector Impact Of International Resource Transfers," Papers 24, Houston - Department of Economics.
- 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.
- Lim, David, 1983. "Instability of government revenue and expenditure in less developed countries," World Development, Elsevier, vol. 11(5), pages 447-450, May.
- 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.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
- Steven Craig & Robert P. Inman, 1986.
"Education, Welfare and the "New" Federalism: State Budgeting in a Federalist Public Economy,"
in: Studies in State and Local Public Finance, pages 187-228
National Bureau of Economic Research, Inc.
- Steven G. Craig & Robert P. Inman, 1985. "Education, Welfare, and the "New" Federalism: State Budgeting in a Federalist Public Economy," NBER Working Papers 1562, National Bureau of Economic Research, Inc.
- Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-45, June.
- 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.
- Sahn, David E., 1992. "Public expenditures in sub-Saharan Africa during a period of economic reforms," World Development, Elsevier, vol. 20(5), pages 673-693, May.
- Habibi, Nader, 1994. "Budgetary policy and political liberty: A cross-sectional analysis," World Development, Elsevier, vol. 22(4), pages 579-586, April.
- Fielding, David, 1997. "Modelling the Determinants of Government Expenditure in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 377-90, October.
- Goel, Rajeev K & Nelson, Michael A, 1998. "Corruption and Government Size: A Disaggregated Analysis," Public Choice, Springer, vol. 97(1-2), pages 107-20, October.
- Joshua Greene, 1989. "The External Debt Problem of Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 836-874, December.
- Fosu, Augustin Kwasi, 2007. "Fiscal Allocation for Education in Sub-Saharan Africa: Implications of the External Debt Service Constraint," World Development, Elsevier, vol. 35(4), pages 702-713, April.
- Benedict J. Clements & Sanjeev Gupta & Emanuele Baldacci & Carlos Mulas-Granados, 2002. "Expenditure Composition, Fiscal Adjustment, and Growth in Low-Income Countries," IMF Working Papers 02/77, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39238. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.