ABSTRACT

This study analyzed the effect of public debt burden on economic growth of three sub-Saharan African economies (SSA), for a period of forty-one years; from 1981 to 2021. Public debt burden was measured by public debt servicing to revenue ratio, total debt to GDP ratio, public external debt to export receipts ratio, public domestic debt to domestic investments ratio, public debt burden for infrastructural development (measured by capital expenditure to GDP ratio) and public debt burden for recurrent expenditure (measured by recurrent expenditure to GDP ratio) while fiscal balance and trade openness were used as control variables. Ex post facto research design was used in a multiple regression analysis framework to determine the partial coefficients of the endogenous variables. First, pre-testing of data for unit root based on the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) approaches were carried out. The ADF and PP tests showed that the series of data were of mixed integration, that a combination of levels and first difference variables which necessitated the application of Autoregressive Distributed Lag (ARDL) model. The ARDL results indicated that the relationship between public debt burden and economic growth followed a long-run path which was confirmed from the F-statistic of the ARDL bounds test. Chiefly, the results provided evidence that the effect of public debt burden varied among Nigeria, South Africa and Ghana. In the long run, the Nigerian economic growth was majorly affected by public debt servicing to revenue ratio, public external debt to export receipts ratio, public debt burden for infrastructural development, fiscal balance and trade openness. South Africa’s long-run economic growth was significantly driven by public external debt to export receipts ratio, public domestic debt to domestic investments ratio and public debt burden for infrastructural development. Ghana’s long-run economic growth was significantly affected by total debt to GDP ratio and public domestic debt to domestic investments ratio. The error correction mechanism of the ARDL model indicated that the speed of recovery to long-run equilibrium was faster for Ghana, followed by South Africa and Nigeria, respectively. From the policy perspective, the findings are of particular interest to government authorities saddled with the responsibility of managing the debt profile and economy. It was suggested that the government should focus on viable capital investments that have high returns that can help service public debt in the nearest future in order not to pass debt to the upcoming generations as an inheritance in the selected SSA nations.