Macroeconomic implications of escalating stock of public debt: Evidence from sub‐Saharan African economies

Olaoye, Olumide Olusegun; Tabash, Mosab I.; Omokanmi, Olatunde Julius; Ogunjumo, Rotimi Ayoade; Ojelade, Matthew Oyeleke; Ishola, James Aranisola

doi:10.1111/1467-8268.12677

Cited by 8 publications

(3 citation statements)

References 61 publications

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“…Piracy and banditry also played a key part in the instability of the region politically, economically and their social life, the inability of the government to provide adequate security to protect citizens from violent attacks unleashed on them by the bandits and domestic insurgents cum other dangerous armed groups who kidnap, rape and kill people across the country is a severe predicament to the economic development in the sub-Saharan Africa despite the huge efforts of United Nations and supportive neighboring countries (Olaoye et al, 2023).…”

Section: Other Factors Includementioning

confidence: 99%

The anatomy of crises in Sub- Saharan Africa economic underdevelopment: A literature review

Oluwapelumi Olofinlade,

Aina Ogunwole,

Ishola Aransiola

et al. 2024

eera

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Political upheaval, economic crisis, corruption and food insecurity are the bane for economic underdevelopment in sub–Saharan Africa; these have caused many lives to face some difficulties and to witness unpalatable experiences. This paper looked into this issue and brought out some factors that likely aggravate the difficulties, crises and insecurity in sub–Saharan Africa especially. A few internal factors that contribute to food insecurity include poor leadership, conflict and subconscious of political administration. It is believed that outside factors contributed in a subtle, occasionally overt manner to the solution of the issue. This paper explained how political crisis, economic crisis, insecurity and food insecurity as a bane of economic underdevelopment of the sub-Saharan African country. The political crisis ranges from an underdeveloped political system, frequent changes in government, political instability, frequent change in government policies, abandonment of economic programs, and banditry and pirate activities at sea. Economic crises such as inflation, debt servicing, bogus foreign exchange regime, infrastructural decay, wrong economic policies are part of the bane of underdevelopment in sub-Saharan Africa. While on Food insecurity, drought, pest and diseases, pandemic outbreak (COVID19), Ukraine crisis/war, storage inadequacy, and seasonality of produce was part of the predicament that hinders development in sub-Saharan Africa. Also, suggestions were made to improve both the political and economic issues regarding food security and the development of sub-Saharan Africa.

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Section: Other Factors Includementioning

confidence: 99%

The anatomy of crises in Sub- Saharan Africa economic underdevelopment: A literature review

Oluwapelumi Olofinlade,

Aina Ogunwole,

Ishola Aransiola

et al. 2024

eera

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“…consumption expenditures. That creates challenges when the economy fails to produce enough to service the debt (Olaoye et al, 2022). The high cost of debt servicing has a negative impact on the national budget, making it challenging for the government to increase investment and public services (Dabrowski, 2014).…”

Section: Asian Development Policy Reviewmentioning

confidence: 99%

“…Economies in SSA have accumulated debt to unsustainable levels, pushing countries to debt overhang challenges, which stimulated calls for debt relief interventions (Olaoye et al, 2022). That resulted in international institutions initiating a policy that was intended to curb the situation of heavily indebted poor countries in 1996 (Ampah & Kiss, 2019).…”

Section: Introductionmentioning

confidence: 99%

An empirical analysis of public debt and government expenditure in South Africa

Thusini,

Mah

2023

5008

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The high rate of growth of public debt in African countries has stimulated debate among professionals, public representatives, and the general public on how government expenditure affects public debt levels. The primary focus of this paper is to study the relationship between public debt and government spending in South Africa. The methodology of this study employs the Johansen test of co-integration, the VECM, and the Granger causality test. The data period is from 1980 to 2020, and time series data was taken from the South African Reserve Bank and the International Monetary Fund. The findings of this study reveal a negative, statistically significant, and unidirectional causality coming from capital expenditure to public debt. Recurrent expenditure is positive and statistically significant, with unidirectional causality from public debt to recurrent expenditure. Inflation is positive and statistically significant; the causality result shows unidirectional causality, that is, from inflation to public debt. The study yielded positive outcomes and demonstrated statistical significance in relation to the relationship between the exchange rate and public debt. The practical implication is that the South African government should spend more borrowed money on capital expenditures. Secondly, public debt could be reduced by continuing with inflation targeting. Lastly, the government should be encouraged to borrow in local currency.

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Soaring inflation in sub-Saharan Africa: A fiscal root?

Olaoye¹,

Omokanmi²,

Tabash

et al. 2023

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The study investigates the effect of fiscal policy on the inflation rate in a panel of 44 sub-Saharan African (SSA) countries over the period 2003–2020 using a non-linear system generalized method of moments (system GMM) and the dynamic panel threshold estimation techniques. The results show that the recent increase in inflation rate has a fiscal nature and that monetary policy alone may not provide an effective response. Specifically, the results indicate that a positive shock to fiscal policy (captured by public debts) has a positive and statistically significant effect on inflation, while a negative shock to public debt has a statistically non-significant impact on the inflation rate. Also, money supply exerted a positive and insignificant impact on inflation, indicating that the current inflation rate in the region may not be induced by money supply. However, the joint effect of public debts and money supply shows that public debts aid the effect of money supply on the inflation rate, albeit, not in the proportion predicted by the quantity theory of money. Further, the results also found a public debt threshold point of 60.59% of GDP. This implies the current inflationary pressure may be rooted in fiscal policy and that further accumulation of public debts beyond the benchmark established in the study would worsen the inflationary pressure in SSA. Importantly, the study found that for fiscal policy to spur growth and reduce inflationary pressure in SSA, the inflation rate should be managed and brought within a single-digit framework of 4%. The research and policy implications are discussed.

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Macroeconomic implications of escalating stock of public debt: Evidence from sub‐Saharan African economies

Cited by 8 publications

References 61 publications

The anatomy of crises in Sub- Saharan Africa economic underdevelopment: A literature review

The anatomy of crises in Sub- Saharan Africa economic underdevelopment: A literature review

An empirical analysis of public debt and government expenditure in South Africa

Soaring inflation in sub-Saharan Africa: A fiscal root?

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