From constitutional term limits to fiscal responsibility: legal framework and institutional dynamics in sub-Saharan Africa

This study examines the relationship between constitutional term limits and fiscal responsibility by analyzing the legal frameworks and institutional dynamics that influence the cyclicality of fiscal policy in sub-Saharan Africa. Covering 43 countries, this research hypothesizes that political, institutional and socio-economic factors are the root causes of fiscal procyclicality. Using an ARDL (Autoregressive Distributed Lag) model with pooled mean groups (PMG) on data covering the period 1996–2023, and employing Mundlak’s approach to handle variables with limited time-series variation, the study provides several key insights. The results reveal that imposing limits on the number of presidential terms and strengthening institutional quality—particularly when these go hand in hand with economic growth—promote countercyclical fiscal policies. Conversely, income inequality and election years exacerbate procyclicality, with public spending increasing significantly during election periods. More specifically, a 1 percentage point improvement in the quality of institutions is associated with an average reduction in public spending of 0.223 percentage points across the region. This reduction varies across regional blocs, amounting to 0.102 percentage points within ECOWAS, 0.34 within the Economic Community of Central African States, and 0.365 in East African countries. These findings highlight the crucial role that strong institutions play in curbing excessive spending. The study recommends improving the quality of institutions through anti-corruption measures, greater government efficiency, political stability and the protection of the rule of law. Furthermore, limiting presidential terms appears to be a key strategy for mitigating election-related political distortions and promoting sustainable long-term budgetary planning.