External debt sustainability in West African countries

Abstract

Purpose: This paper aims to apply the debt sustainability framework using various ratios to review the current state of sovereign debt of Economic Community of West African States (ECOWAS) member countries. Design/methodology/approach: Debt sustainability framework using various ratios (which include the present value approach, Country Policy and Institutional Assessment debt policy assessment ranking and solvency ratio of external debt) for the period 2010 and 2017 were used for the analysis to determine external debt sustainability and solvency of ECOWAS members. Findings: The findings indicate that most ECOWAS countries are already turning at the unsustainable debt path and may renege in their debt obligations, thus creating a vicious cycle of external borrowing that could lead to capital flight. Originality/value: This paper offers the empirical evidence to identify which of the ECOWAS countries are already at the threshold of external debt stress, and in the likelihood to renege on their debt obligations.