Public Debt and Unemployment in Low Income Sub-Saharan African Countries

Abstract

With rising public debt and unemployment in different parts of the globe, this study examined how the two macro issues play out in low income sub-Saharan Africa where the workforce is growing remarkably. Six countries were selected on the basis of income - Burundi, Central African Republic, Chad, Guinea, Guinea-Bissau and Mali. Data was obtained from World Bank’s World Development Indicators (WDI) as well as World Economic Outlook (WEO). A panel data analytical approach was adopted. The result revealed, among others, that although the desired negative relationship existed between public debt and unemployment, such relationship turned out to be both economically and statistically insignificant. This was attributed to either a very low employment generation potential of the projects embarked upon with the borrowed funds or the inefficient application/deployment of such funds. The study recommended the establishment of an employment generation potential (EGP) benchmark for any project/borrowing as a basis for evaluating its feasibility, going forward.