The non-linear effect of public debt on private investment in Sub-Saharan Africa (SSA) economies in a context of re-indebtedness

This article analyzes the non-linear effect of public debt on private investment in Sub-Saharan African (SSA) countries in a context of re-indebtedness. The methodology used is based on a non-linear dynamic panel model with a threshold effect [First Difference Generalized Method of Moments (FD-GMM)] followed by a robustness test to measure the sensitivity of the results. The period covered runs from 2015 to 2024. The results after estimation reveal the threshold existence of 63.13% below which the debt stock has a significant positive impact on private investment, and above which the public debt has a significant negative impact on private investment. Alongside this first-order result, we also find that variables such as the lag of private investment, gross domestic product per capita, business climate, inflation, and political stability improve private investment below the critical debt threshold. As political policy, the results indicate that the countries of this zone are still vulnerable, particularly in this period of global crisis, if resources are not managed more efficiently and effectively.