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<p>Since independence, West African Economic and Monetary Union (WAEMU) countries have relied on external borrowing to finance development due to limited domestic savings and dependence on primary commodities. However, weak governance and poor debt management have often constrained the growth-enhancing potential of public debt. This study examines the role of governance in shaping the relationship between public debt and economic growth in WAEMU countries, using panel data covering all eight member states from 1996 to 2023. Employing the Dynamic Ordinary Least Squares (DOLS) estimator, the analysis examines key governance indicators, including political stability, regulatory quality, and control of corruption. The results reveal three main findings. First, increases in public debt negatively affect economic growth, confirming the constraining effect of excessive borrowing. Second, improvements in governance significantly promote growth by enhancing investment efficiency, improving institutional quality, and facilitating the effective implementation of policies. Third, contrary to expectations, governance does not mitigate the adverse impact of debt; instead, it amplifies its negative effects, reflecting persistent institutional weaknesses in the region. The study emphasises the importance of strengthening debt management, building institutional capacity, and targeting investments in high-multiplier sectors to promote sustainable growth. These findings offer critical insights for fiscal policy and development planning in WAEMU countries.</p>

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Public debt and economic growth in WAEMU countries: evidence on the moderating effect of governance

  • 期刊论文

  • 发表日期：

    2026年2月16日

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  • Michel Krah,
  • Michael Kouadio,
  • Fabrice Anzara

摘要

Since independence, West African Economic and Monetary Union (WAEMU) countries have relied on external borrowing to finance development due to limited domestic savings and dependence on primary commodities. However, weak governance and poor debt management have often constrained the growth-enhancing potential of public debt. This study examines the role of governance in shaping the relationship between public debt and economic growth in WAEMU countries, using panel data covering all eight member states from 1996 to 2023. Employing the Dynamic Ordinary Least Squares (DOLS) estimator, the analysis examines key governance indicators, including political stability, regulatory quality, and control of corruption. The results reveal three main findings. First, increases in public debt negatively affect economic growth, confirming the constraining effect of excessive borrowing. Second, improvements in governance significantly promote growth by enhancing investment efficiency, improving institutional quality, and facilitating the effective implementation of policies. Third, contrary to expectations, governance does not mitigate the adverse impact of debt; instead, it amplifies its negative effects, reflecting persistent institutional weaknesses in the region. The study emphasises the importance of strengthening debt management, building institutional capacity, and targeting investments in high-multiplier sectors to promote sustainable growth. These findings offer critical insights for fiscal policy and development planning in WAEMU countries.