External debt sustainability in West African countries

Abstract

Purpose This paper aims to apply the debt sustainability framework using various ratios to review the current state of sovereign debt of Economic Community of West African States (ECOWAS) member countries. Design/methodology/approach Debt sustainability framework using various ratios (which include the present value approach, Country Policy and Institutional Assessment debt policy assessment ranking and solvency ratio of external debt) for the period 2010 and 2017 were used for the analysis to determine external debt sustainability and solvency of ECOWAS members. Findings The findings indicate that most ECOWAS countries are already turning at the unsustainable debt path and may renege in their debt obligations, thus creating a vicious cycle of external borrowing that could lead to capital flight. Originality/value This paper offers the empirical evidence to identify which of the ECOWAS countries are already at the threshold of external debt stress, and in the likelihood to renege on their debt obligations.

Public Debt Sustainability in Indonesia after Financial Crisis and During COVID-19 Pandemic

“…The second objective of this paper is to measure the sustainability of the government's external debt using the SRED adopted from Omotor [12] and Ulca and Oksay [13] The ability to pay external debt increases if the SRED value is close to 1 or more than 1. The minus SRED value indicates a potential decline in the ability to repay external debt in the next few years.…”

“…Several previous studies related to the analysis of debt sustainability in developing countries [11][12][13][14][15][16][17][18][19][20][21][22][23]. In analyzing debt sustainability in Kazakhstan and the Russian Federation, Mukhtarkhan [11] applies the threshold value of public debt in both countries.…”

“…Previous research examined debt sustainability in West African countries for the period 2010-2017 [12]. The measurement of debt sustainability uses various ratios; present value approach, debt policy rating ratings of State and Institutional Policy Assessments, and external debt solvency ratios-SRED.…”

Relationship between Public Debt and Exports in Nigeria: A Granger Causality and Threshold Analysis Approach

“…Therefore, a country that obtains a foreign loan can import goods and services from abroad worth the value of the loan without necessarily having to export in exchange. But because it is necessary for the debt and the accrued interest to be repaid, it is now necessary for such a country to get involved in exporting goods and services without interchanging any form of imports (Omotor, 2021). Domestic loans might not put so much pressure on exchanging goods and services among countries.…”

“…Even though the country has delighted in a huge amount of foreign exchange resulting primarily from its oil and gas natural resources, economic growth has been weak. In contrast, the poverty incidence level has increased over the years (Omotor, 2021). Because of the trend of poverty, the scarce resources and the law of comparative advantage, nations depend on one another to foster their respective economies to accomplish sustainable economic development.…”