Title: PUBLIC DEBT SUSTAINABILITY AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA: THE MODERATING ROLE OF FISCAL GOVERNANCE AND INSTITUTIONAL QUALITY

Author: Mutua John Wambua

Abstract: Public debt sustainability has become a critical economic challenge for Sub-Saharan African economies due to increasing borrowing requirements, rising debt-servicing obligations, and limited fiscal space for development investment. This study examined the effect of public debt sustainability on economic growth in Sub-Saharan Africa, focusing on the moderating roles of fiscal governance and institutional quality. The study was anchored in Debt Overhang Theory, Fiscal Sustainability Theory, and Institutional Theory. An explanatory research design and quantitative approach were adopted using secondary panel data from 20 Sub-Saharan African economies covering 2010–2025, resulting in 320 country-year observations. Data were obtained from the World Bank Development Indicators, International Monetary Fund databases, African Development Bank reports, and Worldwide Governance Indicators. Descriptive statistics, correlation analysis, and fixed-effects panel regression with interaction terms were employed. The results showed that public debt sustainability had a negative and statistically significant effect on economic growth (β = −0.041, p = 0.001). External borrowing (β = −0.028, p = 0.011) and debt-servicing costs (β = −0.036, p = 0.011) also had significant negative effects on economic growth. Foreign direct investment positively influenced growth (β = 0.214, p = 0.010), while inflation had a significant negative effect (β = −0.067, p = 0.002). The baseline model explained 46.2% of the variation in economic growth. Fiscal governance significantly reduced the adverse effect of public debt on growth (β = 0.019, p = 0.018), while institutional quality produced a stronger positive moderating effect (β = 0.024, p = 0.008). The moderated model explained 53.8% of the variation in economic growth. The study concludes that the economic consequences of public debt depend on borrowing levels, debt-servicing pressures, governance effectiveness, institutional strength, and the productive allocation of borrowed resources. It recommends strengthening debt-management frameworks, fiscal transparency, institutional accountability, domestic revenue mobilization, and the allocation of borrowed funds to productive investments.

Keywords: Public debt sustainability, economic growth, external borrowing, debt-servicing costs, fiscal governance, institutional quality, Sub-Saharan Africa.

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