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Research Article

Taxes and External Short-Term Debt in Sub-Sahara Africa

Kehinde Mutiyat, OWOLABI; Ishola Rufus, AKINTOYE and Samuel Olajide, DADA

Corresponding Author: Owolabi Kehinde, Department of Accounting, School of Management Sciences, Babcock University, Nigeria.

Received: April 18, 2023 ;    Revised: May 02, 2023 ;    Accepted: May 05, 2023 ;   Available Online: May 31, 2023

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Revenue mobilization is pivotal to maintenance of debt sustainability. It is also essential to debt reduction through its application to debt financing. This study investigated the effect of tax revenue on external short-term debt stock of Sub-Saharan African [SSA] countries. The study also examined the controlling effect of inflation, exchange rate and corruption on tax revenue and external short-term debt of SSA countries. Ex-post facto research design was adopted in testing and analyzing a dynamic panel estimated with system General Method of Movements [GMM] data set for this study. Dynamic panel was adopted because it eliminates bias and weaknesses of the regressors’ dimension by taking it to its lag term. Population comprised 23 SSA countries for the period 1990 to 2020. The study found that tax revenue had significant effect on External Short-Term Debt Stock [J-stat 20.05 = 0.39, ρ > 0.1]. Exchange rate, inflation and corruption had significant control effect on tax revenue and External Short-Term Debt Stock [J-stat 17.398 = 0.36, ρ > 0.1]. The study concluded that tax revenue improved financing of external short-term debt of SSA countries. It recommended to policymakers to carefully consider reducing accumulation of external short-term debt stock, curtail the volatility of exchange rate, inflation and corruption, and sustain the nations’ revenue generation.

Keywords: Corruption, Debt, Exchange rate, External short-term debt, Inflation, System general method of movements, Tax revenue

 

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