Determinants of Government Debt in Sub-Saharan African Countries: The Role of Conflict, Governance, and Economic Factors

Abstract

Abstract In recent years, there have been growing concerns around the implications of large fiscal imbalances in sub-Saharan African countries (SSA). An ongoing debate focuses, among other things, on the determinants of public debt in the sub-region. Much of the recent work has, however, employed descriptive methods in quantifying the extent of the debt problem and in explaining the drivers thereof. Moreover, most studies only consider macroeconomic factors. Instead of focusing only on macroeconomic factors, this study considers the influence of conflict and governance as important drivers of public debt in SSA countries given that most of them have experienced (or are still experiencing) conflict and poor governance. Focusing on a sample of 38 SSA countries over the period 1996–2019, it employs a variety of panel methods, namely, the pooled OLS, one- and two-way fixed effects, and instrumental variables fixed effects to facilitate the comparison of results. The study finds compelling evidence showing that conflict and governance are important determinants of SSA’s public debt in addition to the economic factors. Policy recommendations based on the findings are discussed.