Aid, debt and fiscal policies in Senegal

Bazoumana Ouattara

Journal of International Development, 2006, vol. 18, issue 8, 1105-1122

Abstract: This paper uses the fiscal response framework to study the effects of aid flows on key fiscal aggregates in Senegal, over the period of 1970-2000. Attention is given to the interplay between aid and debt. The paper contributes to the empirics of fiscal response modelling by deriving the standard errors and p values associated with the different mechanisms of the structural and reduced form equations. The main findings in this paper are: (i) relatively large shares of government resources are used to finance debt servicing; (ii) the impact of aid flows on domestic expenditure is statistically insignificant and (iii) debt servicing has a significant negative effect on domestic expenditure. The main policy implication of this study is that debt reduction could be a more effective policy tool than additional aid (loans) in financing pro-poverty expenditure as well as public investment. Copyright © 2006 John Wiley & Sons, Ltd.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:18:y:2006:i:8:p:1105-1122

DOI: 10.1002/jid.1282

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