Sovereign debt sustainability in MENA countries: Determinants and policy implications
Sovereign debt sustainability in MENA countries: Determinants and policy implications

Summary/Abstract: This paper examines sovereign debt sustainability in the Middle East and North Africa(MENA) region by comprehensively analyzing macroeconomic, institutional, and geopoliticaldeterminants. Using a panel dataset of 15 MENA countries spanning 2000-2023, we employdynamic panel estimation techniques to identify key factors affecting debt sustainability. Ourfindings reveal significant heterogeneity across the region, with oil-exporting countriesdemonstrating distinct debt dynamics compared to oil-importing nations. Institutional quality andgovernance indicators emerge as critical predictors of debt sustainability beyond traditionalmacroeconomic variables. Furthermore, our threshold analysis identifies specific debt-to-GDPlevels at which growth effects become negative, varying substantially across country groups. Theresults underscore the importance of tailored policy approaches to regional debt management,challenging one-size-fits-all recommendations from international financial institutions. Thisresearch contributes to the literature by developing a novel composite debt sustainability index andproviding empirical evidence on the region-specific determinants of sustainable sovereign debtmanagement.

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