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

Authors: Olusegun Ayodele Akanbi

Addresses: Economics Department, University of South Africa, UNISA, P.O. Box 392, 0003, Pretoria, South Africa

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.

DOI: 10.1504/IJSE.2016.075916

International Journal of Sustainable Economy, 2016 Vol.8 No.2, pp.93 - 110

Received: 09 Dec 2015
Accepted: 09 Dec 2015
Published online: 12 Apr 2016 *

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