The paradox of strong institutions: when better governance intensifies public debt’s drag on economic growth in Heavily Indebted Poor Countries (HIPCs) in Africa

This study examines the threshold effect of public debt on economic growth in Africa’s Heavily Indebted Poor Countries (HIPCs) within the broader context of globalization, where increased financial integration and global governance frameworks shape national debt dynamics. Using secondary data for the period 2000–2023, a dynamic threshold regression model is employed to estimate debt thresholds, while the system GMM estimator is applied to assess how institutional quality conditions the debt–growth relationship. The results confirm a nonlinear relationship between debt and growth, with an overall public debt threshold of about 22%. Debt supports growth below this level but becomes contractionary above it. Sub-group analysis shows thresholds of 25% for low-income countries and 22% for resource-intensive countries, while no significant nonlinear relationship is detected for lower-middle-income or non-resource-intensive countries. Contrary to much of the existing literature, the findings indicate that institutional quality amplifies, rather than mitigates, the negative effect of debt on growth. These results highlight the asymmetric nature of globalization, showing that in highly indebted and globally integrated low-income economies, stronger institutions may enforce global fiscal norms that limit domestic policy space. Policy implications suggest that institutional reforms alone are insufficient; African HIPCs need to complement governance improvements with debt relief, restructuring, and prudent borrowing anchored in concessional finance and global cooperation