Exploring the Impact of Fiscal Sustainability on Economic Growth: Evidence from Sierra Leone

Abstract

This paper examines the long-term relationship between fiscal sustainability, institutional quality, and economic growth in Sierra Leone using the ARDL model. Fiscal sustainability is crucial for every economy, as it underpins sustained growth and protects macroeconomic stability. However, Sierra Leone continues to face chronic fiscal deficits, a high debt burden, and limited domestic revenue capacity, all of which hinder its economic development. By providing new evidence from a fragile, post-conflict economy where fiscal instability has persisted, this study contributes to the broader literature on fiscal-growth dynamics in developing and post-conflict nations. Using annual data from 1980 to 2024, the analysis shows that the synergy between sound fiscal management and institutional reform is vital in driving long-term economic growth. Achieving sustainable and inclusive development requires the efficient allocation of public resources, prudent debt management, stronger governance, and increased political stability. In the short term, the interaction between fiscal and institutional factors is dynamic, emphasizing the need for adaptive and coordinated policy responses. To ensure lasting growth, policymakers should enhance resilience against both domestic and external shocks through economic diversification, robust social protection systems, and phased institutional reforms