Effect of Public Debt on Poverty in Sub-Saharan Africa

Utilizing the two-step system Generalized Method of Moments technique on panel data covering 1996 through 2022 on 30 sub-Saharan African countries, this study examines the effects of public debt on poverty. The empirical results indicate that public debt has a significant positive effect on poverty, suggesting that increases in debt bring about worsening cases of poverty in the region. Additionally, corruption was found to exert a significant positive effect on poverty, implying that as corruption increases, poverty rate also increases. The findings in the study underscore the imperative of public policy on debts and the role that a weak institutional environment can have on welfare. It is recommended that countries in sub-Saharan Africa should avoid public debts that raise poverty levels, provide social safety nets to the poor and vulnerable as well as strengthen institutions and governance through increasing transparency.