Fiscal policy, institutional quality and economic growth in Sub-Saharan Africa

Sub Saharan Africa faces a deepening fiscal growth dilemma. Public debt has risen sharply, while weak revenue mobilization, rising debt service costs and persistent governance constraints limit governments’ ability to convert borrowing into productive investment. Although public borrowing can finance infrastructure, human capital and crisis response, its growth benefits depend on the fiscal and institutional systems through which resources are mobilized, allocated and monitored. This study examines the relationship between fiscal policy composition, institutional quality and GDP per capita growth in 42 Sub Saharan African countries over 2000–2024. The findings show that public debt is negatively associated with growth, while the nonlinear specification confirms that the growth penalty intensifies at higher debt levels, consistent with debt overhang arguments. Revenue mobilization becomes growth enhancing once endogeneity is addressed, whereas government expenditure is negatively associated with growth in the dynamic specification, reflecting expenditure-composition and efficiency constraints. Institutional quality emerges as one of the most consistent growth-enhancing factors. The study concludes that debt sustainability in Sub-Saharan Africa should be assessed through fiscal and institutional conditions, not debt ratios alone.