Public debt dynamics and fiscal sustainability in selected North African countries: new evidence from recurrent explosive behavior tests and quantile unit root analysis

In the aftermath of the COVID-19 pandemic crisis, government debt has surged to unprecedented levels in most countries, including those of North Africa. In this study, we investigate the issue of public debt sustainability in four North African countries (Algeria, Libya, Morocco, and Tunisia). The Generalized Supremum Augmented Dickey–Fuller (GSADF) results show that Algeria, Libya, Morocco, and Tunisia have experienced periods of explosive public debt during the studied period. The identified episodes of explosive debt behavior can be seen as periods of unsustainable fiscal policy. Moreover, the Quantile Auto-Regressive (QAR) unit root results point to strong debt sustainability at the lower quantiles for the selected countries, while at the middle and upper quantiles, public debt exhibits an unsustainable dynamic. This finding, therefore, points to weak sustainability of debt and fiscal policies in Algeria, Morocco, Libya, and Tunisia. This paper provides further evidence that fiscal policies have become more unsustainable than sustainable in recent years in these countries. Consequently, fiscal policymakers in MENA countries should not overlook the unsustainability of public debt and its various effects when developing any strategy aimed at stimulating the economy through ever larger debt levels.