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Is Foreign Debt Management in Gabon Efficient?

Scott Regifere Mouandat ()

Management Dynamics in the Knowledge Economy, 2022, vol. 10, issue 1, 82-94

Abstract: The objective of this paper is to show whether external debt management in Gabon is effective. Our study period is from 1989 to 2019 and we use error correction modeling. The significance and positive sign of the recall force shows that short-term imbalances do not correct in the long run, implying that debt management is inefficient as exchange rate fluctuations create changes in the shares of debt denominated in U.S. dollars, Japanese yen, and special drawing rights in both the short and long run. It is difficult for the debt manager to balance his portfolio. The originality of the article is to show that the management of the debt, in particular the external debt, is difficult to be seen inefficient by taking the example of a small economy opened on the outside. It is then a question of rethinking public policies and especially of carrying out structural reforms in the economy in order to minimize the consequences of a high external debt. In this context, the literature recommends either dollarizing all of its debt or allowing the development of a domestic bond market to protect against (or at least minimize) the effects of exchange rate fluctuations on external debt. While we find the latter proposal relevant, we believe that the former is not. Furthermore, we would add that Gabon should implement reforms to boost its industrial sector in order to improve its integration into international trade. The goal is to counter (even partially) the effects of currency fluctuations through export gains.

Keywords: debt portfolio; exchange rate; external debt management; foreign currency denominated debt; Original sin (search for similar items in EconPapers)
Date: 2022
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