Corruption, Institutional Environment and Fiscal Sustainability in Sub-Saharan Africa

Abstract

Many Sub-Saharan African governments have struggled to achieve fiscal sustainability. Empirical literature argued that corruption impedes efforts to achieve fiscal sustainability. Moreover, there is evidence in the literature that corruption will be more widespread and severe in achieving fiscal sustainability in economies with poor institutional environments. The study investigated moderation of institutional environment between corruption and fiscal sustainability in SSA countries by utilizing system Generalised Method of Moment estimation technique and 39 SSA countries. According to the study, a weak institutional environment exacerbates the effect of corruption on the fiscal sustainability of Sub-Saharan African economies. Consequently, SSA should countries implement efforts to strengthen their institutional framework in order to reduce high levels of corruption and achieve fiscal sustainability. Corruption can be addressed in order to promote fiscal sustainability through improving government performance, eliminating corruption, improving regulatory quality, adhering to the rule of law, and providing for voice and accountability. Also, improved institutional environment will have a positive influence on fiscal sustainability.