Influence of governance indicators on public debt accumulation in Africa

Abstract

PurposeThe unsustainable public debt of most African economies adversely affects their economic growth and stability. This study aims to explore the influence of cross-country indicators of governance from African countries on public debt accumulation.Design/methodology/approachThe study deployed a quantitative research design technique. Secondary data was used in this study. The frequency of the data is annual, and it is available from 1996 to 2022 for 48 countries in Africa. The study deployed the system generalized method of moments for the estimation.FindingsThe study finds that countries with high regulatory quality standards, control corruption and ensure effective governance accumulate less government debt while countries that abide by the rule of law instead accumulate more government debt. The study also finds that economic growth and government revenue reduce government gross debt while government expenditure and investments increase public debt.Research limitations/implicationsDue to data unavailability, other factors which are likely to influence government debt accumulation were not included in the study as control variables. This is the limitation of the study.Social implicationsAfrican governments should strive to maintain high regulatory quality standards through the formulation and implementation of sound policies and regulations that permit and promote private sector development, and ensure quality and accountability of public and civil services. Governments are also urged to control corruption and enact good laws so that the enforcement of these laws will not worsen the risk of becoming debt-distressed.Originality/valueRecent studies on governance and public debt were focused on the Arabian Gulf countries, countries of the Middle East and North Africa (MENA) region and a combination of high and low-income countries. This study scrutinizes exclusively the effects of the quality of governance indicators on public debt accumulation, in the context of Africa.