Does public debt deter donor financing for renewable energy? Evidence from low- and middle-income countries

Donor funding for renewable energy plays a crucial role in supporting low- and middle-income countries’ energy transitions. This study analyzes data from 34 countries over 2000–2020 to examine how public debt and governance affect donor funding flows. Using fixed effects and dynamic system GMM methods, we find that higher public debt significantly reduces donor support, while governance shows mixed effects, with corruption control being somewhat important. The results also show a strong positive effect of previous donor funding, indicating persistence over time and reflecting ongoing commitments. These findings suggest that governments should focus on effective debt management and strengthening governance to attract more donor financing and support sustainable energy development.