Is public debt accumulation in Sub-Saharan Africa a consequence of poor growth?

This study examines the direction of causality between public debt and economic growth in Africa. Further, the role of economic expansion on the dynamics of public debt in sub-Saharan Africa is examined. The study utilised data for 38 sub-Saharan African countries covering 2000-2022 for analysis. To account for potential endogeneity in the econometric model estimation, the endogeneity-correcting Panel VAR Granger Causality test was employed to examine the direction of causality between public debt on economic growth. Further, the System GMM model and Panel VAR Impulse Response Function (IRF) were used to examine the effect of economic growth on the dynamics of public debt in the region. The estimation results reveal a unidirectional causality running from economic growth to public debt. This implies that public debt accumulation in the region might be a consequence of poor economic performance and not the reason for the challenging economic performance of the region. In addition, economic growth is found to have a deleterious effect on the stock of public debt in the region. Further, the robustness test result using the IRF shows a negative response of public debt to shocks in economic growth. These findings have significant policy implications for public debt management in sub-Saharan Africa.