Investigating the Government Finance in Mali: Revenue, Expenditure, Debt and Policy Implications

This study explores the dynamic relationship between government revenue, expenditure, and public debt in Mali over the period 2000 to 2024, employing a Vector Error Correction Model (VECM) framework. The Johansen cointegration test confirms the existence of a long-term equilibrium relationship, reflecting underlying structural fiscal imbalances. The analysis reveals that government expenditure exerts a negative influence on revenue, suggesting that excessive spending hampers effective revenue mobilization. In contrast, public debt does not demonstrate a significant impact on revenue, indicating inefficiencies in the implementation of debt-financed policies. In the short run, expenditure adjusts significantly in response to deviations from the long-term equilibrium, while revenue and debt do not exhibit notable responsiveness. Moreover, Granger causality tests based on the Toda-Yamamoto approach reveal a bidirectional causality between revenue and expenditure, lending support to both the tax-spend and spend-tax hypotheses. The results also indicate that public debt is influenced by both revenue and expenditure, implying that fiscal deficits in Mali are predominantly financed through borrowing. These findings underscore the critical need for comprehensive fiscal reforms aimed at enhancing tax efficiency, ensuring prudent public spending, and promoting sustainable debt management to safeguard macroeconomic stability.