Fiscal Sustainability in the PALOP Economies

Antonio Afonso, Emanuel Reis Leão (), Dilson Tiny () and Diptes Bhimjee
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Emanuel Reis Leão: ISCTE-IUL, Department of Economics, ISCTE Business School
Dilson Tiny: Central Bank of São Tomé and Príncipe, Research Department

Notas Económicas, 2022, issue 54, 57-70

Abstract: The Global Financial Crisis has typically led to a significant widening of fiscal positions (i.e. higher budget deficits and public debt), an issue that has been addressed by many re-searches on fiscal sustainability. Our aim in this study is to extend the extensive knowledge about fiscal policy sustainability in advanced economies by analysing the sustainability in the African continent. In particular, we examine the sustainability of public finance in Portuguese-speaking African countries (PALOP), using stationarity tests of external public debt-to-GDP ratios and cointegration tests between public revenue and public expenditure (as a percentage of GDP). Our findings for the period 1975-2019 suggest that some of the PALOP countries have endangered the sustainability of their corresponding fiscal positions. In fact, in our sample the solvency requirement seems to have been met only by Angola. In the context of a financial crisis, stemming from the COVID-19 pandemic, such sustainability issues are bound to be further challenged.

Keywords: Debt sustainability; global financial crisis; fiscal policy; PALOP; stationarity; cointegration; time series. (search for similar items in EconPapers)
JEL-codes: C22 E62 H62 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:gmf:journl:y:2022:i:54:p:57:70

DOI: 10.14195/2183-203X_54_3

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