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External debt accumulation in sub-Saharan African countries: how fast is safe?

Olusegun Akanbi

International Journal of Sustainable Economy, 2016, vol. 8, issue 2, 93-110

Abstract: This paper empirically examines the rate of debt accumulation that limits the probability of debt distress. The estimations are based on a panel of 45 sub-Saharan African (SSA) countries over the period 1972-2012 using the dynamic probit estimation techniques. The results from the estimations suggest that countries with poor governance rating can sustain a lower rate of debt accumulation while those with a good governance rating are able to sustain a higher rate of debt accumulation for a given probability of debt distress. Given its current status, sub-Saharan African countries' rate of debt accumulation is regarded as being unsustainable. This study has extended the debate on external debt sustainability and provides a benchmark for determining the financial commitments that should be offered to these countries.

Keywords: debt accumulation; debt distress; debt sustainability; governance; sub-Saharan Africa; SSA; external debt; dynamic probit estimation; financial commitments. (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:ids:ijsuse:v:8:y:2016:i:2:p:93-110