According to the definition of the primary balance sustainability gap stated above, positive values indicate that the primary balance, if sustained, would help reduce the general government gross debt burden over time. On the other hand, a negative primary balance sustainability gap would signal a primary balance that would increase the stock of government debt over time.<sup>13</sup>

# **5.2.  Primary Balance Sustainability Gap in Sub-Saharan Africa: International Comparison**

Most developing country regions, with the sole exception of South Asia, have experienced fairly sound fiscal positions in the run-up to the global financial crisis —that is, during the period 200308. Sizable primary surpluses in almost all regions across the world enabled countries to reduce or stabilize their level of public debt before the crisis hit the global economy.

All regions implemented countercyclical fiscal policy measures in 2009, thus leading to a deterioration of their primary balances. In the aftermath of the 2008-09 global financial crisis, fiscal balances slightly improved as green shoots emerged and countries started recovering although at different speeds during the 2010-13 period. However, fiscal balances deteriorated— especially among emerging markets and developing countries—from 2014 to 2016 amid falling commodity prices.

Post-crisis debt ratios have broadly increased to their pre-crisis levels in most regions, except in the Middle East and North Africa (MENA) and South Asia (SA) regions. Although the effects of the global financial crisis have receded, many developing countries (especially commodityexporting countries) have been unable to stabilize their debt to pre-crisis levels, and their primary balance sustainability gaps have deteriorated.

Figure 8 reports the primary sustainability gaps for SSA and other developing countries regions from 2003 to 2016, and examined over four distinct periods: (a) run-up to the crisis (2003-08), (b) crisis period (2009), (c) near aftermath of the crisis (2010-13), and (d) episode of plunging commodity prices (2014-16). As stated above, this sustainability gap is calculated based on the primary balance that stabilizes the stock of debt at a specific target; in turn, that target for all the developing regions (including SSA) is defined as the historical median value of the debt stock for the developing countries.<sup>14</sup> Some key findings emerge from figure 8.

First, most developing regions, except South Asia, exhibited a positive primary balance sustainability gap in the run-up to the crisis. During 2003–08, many developing countries narrowed their primary deficits or turned them into surpluses that helped steadily lower their level of debt. For instance, SSA registered a positive primary balance sustainability gap of 6.5 percent of GDP— higher than that of Latin America and East Asia. Furthermore, some low-income countries in SSA

> 13 For more details on the concept and modeling of the fiscal sustainability gap, see Kose et al. (2017) and World Bank (2017).

> 14 Kose et al. (2017) note that this approach, compared with benchmarking against each economy’s own historical median, implies more favorable debt targets in economies with debt below the peer-group median (in this case, the developing country group) and less favorable debt targets in economies with debt above the peer group median.

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