On the optimal public debt thresholds for electricity infrastructure and clean energy investment in sub-Saharan Africa

Purpose This study aims to examine whether public debt has a nonlinear effect on electricity infrastructure and clean energy investment in 28 sub-Saharan African countries. It identifies the debt levels beyond which public borrowing ceases to support energy-sector development and becomes a fiscal constraint. The analysis also distinguishes between total public debt and external public debt to assess whether debt composition influences the emergence of adverse effects. Design/methodology/approach This study uses panel data covering 28 sub-Saharan African countries from 2010 to 2021. Linear and quadratic dynamic panel models are estimated using system generalized method of moments. The Lind–Mehlum test is applied to validate the inverted U-shaped relationships and calculate the turning points. Robustness is assessed using the Seo–Shin dynamic panel threshold model, which accounts for endogeneity and identifies regime changes associated with total and external public debt. Findings Public debt initially supports energy development but becomes detrimental beyond critical levels. The quadratic estimates identify total public debt thresholds of 82.3% of gross domestic product for electricity infrastructure and 47.5% for public investment in renewable energy. The corresponding external debt thresholds are lower, at 59.9% and 38.5%, respectively. The Seo–Shin estimates confirm the same qualitative nonlinear pattern, although the numerical thresholds differ. Clean energy investment is more sensitive to fiscal pressures than electricity infrastructure, while external borrowing triggers the adverse regime earlier than total public debt. Originality/value To the best of the author’s knowledge, this study provides one of the first empirical assessments of public debt thresholds specifically related to electricity infrastructure and public investment in renewable energy in sub-Saharan Africa. Unlike previous studies centred on economic growth, aggregate infrastructure or renewable energy consumption, it examines the direct financing channel linking debt to energy investment. It combines alternative nonlinear estimators and distinguishes between total and external public debt, showing that both the level and composition of debt shape energy-sector outcomes.