Relationship between Public Debt Burden and Health Expenditure in Sub-Saharan African Countries: The Role of Institutional Quality

Abstract

The historically lower level of public health expenditure of sub-Saharan African (SSA) countries could be partly explained by the mounting debt burden of this region. This consumes a sizable proportion of their domestic resources to debt servicing and potentially decreases their overall budgetary allocations to various sectors in the economy and health expenditure in particular. Using the Generalized Method of Moments (GMM) approach on a sample of 43 sub-Saharan African countries, we examined the relationship between the public debt burden and health expenditure highlighting the role of institutional quality for the period 2000 – 2014. The empirical result confirms that the relationship between public debt burden and health expenditure in sub-Saharan Africa is negative. Interestingly, however, the marginal effect of the relationship between the public debt burden and health expenditure has shown that such a negative relationship turns out to be positive when the quality of the institutions is at maximum. This suggests that the relationship between the public debt burden and health expenditure in sub-Saharan Africa is a function of institutional quality. Therefore, to minimize the negative impact of public debt on health expenditure in sub-Saharan Africa, governments should take determine stand to minimize its debt accumulation and intensify efforts toward the improvement of institutional quality in the region comprehensively.