INFRASTRUCTURE FINANCING AND DEBT SUSTAINABILITY IN AFRICAN ECONOMIES: EVIDENCE FOR SUSTAINABLE DEVELOPMENT

Abstract

Infrastructure, encompassing both hard and soft components, is fundamental to economic growth, social cohesion, and sustainable development. The simultaneous issues of funding infrastructure and maintaining debt sustainability in African economies have highlighted the multifaceted character of infrastructure. In addition to concerns with the cost and accessibility of infrastructure services, the overall quality of these services is also defective. These factors have led to the assessment that poor infrastructure has caused a decline in output across numerous African nations. Publicly funded infrastructure projects, particularly those financed by government and international financial institutions like the IMF, World Bank, and African Development Bank, frequently do not attain the intended results due to issues of corruption, inefficiency, and insufficient transparency. Conversely, the influx of private capital to Africa is markedly less than that in other developing regions. This paper examines the relationship between Infrastructure Financing and Debt Sustainability in African Economies from 1980–2023. Using World Development Indicators and the ARDL bounds testing approach, it assesses whether debt-financed infrastructure fosters growth or deepens fiscal risks. Findings reveal that energy-related investments significantly enhance growth, while health infrastructure shows mixed effects due to inefficiencies and weak institutions. Rising debt-to-GDP ratios worsen fiscal imbalances, though the error correction model indicates policy responsiveness to shocks. The study concludes that effective fiscal reforms, revenue diversification, and transparent debt management are essential to balance infrastructure needs with sustainable, inclusive development.