Sub-Saharan Africa’s public debt vulnerabilities: Does financial market structure matter?

Purpose This paper aims to investigate whether Sub-Saharan Africa (SSA)’s financial market structure exacerbates the sub-continent’s public debt vulnerabilities, where the latter is composed of currency mismatch, debt sustainability and maturity disparity. Design/methodology/approach An analytical framework is developed using comparative statics to explore the effects of the sub-continent’s financial market structure on the highlighted three dimensions of public debt concerns. Panel econometrics, including generalized method of moments (GMM) regressions and Granger causality tests, are employed for the empirical analysis. Findings The sub-continent’s financial market structure worsens both currency and maturity mismatch. There is no evidence that it affects debt sustainability. However, both currency and maturity disparities Granger cause debt sustainability. Originality/value The first original contribution of this paper is its novel analytical framework and derived conclusions. Taking into account the distinctive features of SSA’s financial systems, equating exports to the domestic debt simultaneously minimizes currency and maturity mismatch. The GMM regressions and Granger causality tests are one of the few empirical analysis, examining the relation between financial market structure and public debt management.