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In Investigating the Impact of Public Debt on Poverty Alleviation in Sub-Saharan Africa: Are institutions friend or foe?


Author: Lawal Wasiu Omotayo, Zainab Said Suwaid*
Department of Economics Bayero University Kano.
Published Date: 2024-01-20
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Keywords: Public Debt, Corruption, Poverty and System GMM.
Abstract:
The study investigates whether institutional environment play any role on the impact of public debt on poverty level in sub-Sahara region from 2000 to 2022. The study uses cross-sectional data of 43 Sub-Saharan Africa countries. System GMM estimator was employed, the result shows a positive impact of health and education expenditure respectively on poverty level in the Sub-Sahara African region. Institutional environment appears to be a friend and a signifIcant mediating variable explaining how increasing public debt affect povert in Sub-Saharan african countries. The coefficients are statistically significant for education and health expenditure respectively, implying that human capital development through spending on education and health have not aided the attainment of the required threshold for drastically reducing poverty rate in the sub-Saharan African region contrary to theoretical expectation. The positive coefficient and 5% statistically significant of the GDP is not by any means amazing, an increase in the gross domestic product is a curse or a blessing. The evidence from the empirical result further shows that a trivial and indirect drag of GDP on poverty rate in the region. The study therefore recommends that if institutional environment can be enhanced, then public debt should align with a corresponding development level that can reduce the level of poverty in the African sub- Sahara region specifically since education expenditure appears to be one of the main dominant contents of public debt, government can continue in this area.