Public Debt and Economic Growth in Selected Sub-Saharan African Countries: The Moderating Role of Institutional Quality

Abstract

Low economic growth amid high public debt has recently become a major concern in Sub-Saharan Africa (SSA), raising the question of how institutional quality influences the effectiveness of public debt in stimulating economic growth. This study examines the impact of public debt, institutional quality, and their interaction on economic growth in selected SSA countries, using an annual dataset from 2000 to 2025. To estimate the short-run and long-run impacts of the variables, the study uses the Pooled Mean Group (PMG) estimator within the Panel Autoregressive Distributed Lag (ARDL) framework. The results show that public debt has a significant negative impact on economic growth in the long run. Institutional quality also strongly and negatively affects economic growth. The interaction effect between public debt and institutional quality is also statistically significant and negative, implying that poor institutional quality exacerbates the negative influence of public debt on economic growth. Nevertheless, in the short run, the effects of public debt and institutional quality are statistically insignificant because developing economies adjust gradually. These findings suggest that the growth impacts of public debt depend not only on borrowing size but also on the quality of institutions responsible for managing and using borrowed funds productively. Hence, the study recommends improving institutional quality through stronger governance, accountability, and transparency to enhance the productive use of borrowed funds and achieve sustainable economic growth in SSA countries. Keywords: Economic growth, Panel ARDL, Public debt, Institutional quality