Projects

Capital flight and government debt sustainability in Africa

Adamu Braimah Abille, M.A.

• Basic informations
• Characteristics

• Duration of the project: 01/2024 - 12/2024
  ID number: APP0454

   

• While the International Monetary Fund recognizes the potential effect of capital flight on the debt position of African countries, it has not been incorporated into the fund’s framework for analysing the debt sustainability (DSA) of these countries. Also, the extent to which capital flight threatens most developing countries' debt sustainability is not well established in the literature. Given the enormity of the capital flight phenomenon in Africa, as demonstrated in the revolving-door hypothesis of capital flight and external debt, this project seeks to incorporate capital flight into the IMF’s DSA template. The project will count on the strength of the pooled mean group and the system-GMM empirical estimates of the effect of capital on sovereign bond spreads to simulate a capital flightless counterfactual sovereign bond spreads of the countries to demonstrate the true effect of capital flight.