Vulnerability to climate change and funding squeeze in Sub-Saharan Africa

Amétépé Egbétoké and Loredana Ureche-Rangau ()
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Amétépé Egbétoké: LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne
Loredana Ureche-Rangau: LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne

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Abstract: The paper investigates whether and how climate vulnerability affects public debt. We focus on a region that is highly vulnerable to climate change, but scarcely explored, namely Sub-Saharan Africa. On a sample of annual data covering 38 Sub-Saharan African countries over the period 2000–2022, our results highlight a negative relationship between the debt-to-GDP ratio and climate vulnerability. This relationship holds even when we control for several factors, namely financial crises, sovereign defaults or debt relief programs. Moreover, we account for cross-country dependence and heterogeneity and use variables measuring organized violence and adaptive capacity to climate change as instruments for climate vulnerability. When analyzing the impact of fiscal rules, our results show evidence that while climate vulnerability reduces the debt-to-GDP ratio in countries with expenditure and credible budget balance rules, establishing revenue and credible debt rules may alleviate the funding squeeze.

Date: 2026-03
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Published in Journal of International Financial Markets, Institutions and Money, 2026, 107, pp.102281. ⟨10.1016/j.intfin.2025.102281⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05447296

DOI: 10.1016/j.intfin.2025.102281

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