Government Revenue, Expenditure, and Public Debt in Mali: Empirical Evidence and Policy Implications

Abstract

This study examines the relationship between government revenue, expenditure, and public debt in Mali (2000–2024) using a Vector Error Correction Model (VECM). The Johansen cointegration test confirms a long-term equilibrium, highlighting structural fiscal imbalances. Results show that expenditure negatively impacts revenue (-1.3017 elasticity), indicating that excessive spending weakens revenue mobilization. Public debt has no significant effect on revenue, suggesting inefficiencies in debt-financed policies. In the short run, expenditure adjusts significantly to disequilibrium (ECT = 0.6998, p = 0.001), while revenue and debt remain unresponsive. Furthermore, Granger causality tests, based on the Toda-Yamamoto approach confirms a bidirectional relationship between government revenue and expenditure, supporting both the tax-spend and spend-tax hypotheses. Additionally, there is supporting evidence that public debt is Granger-caused by both revenue and expenditure, indicating that fiscal deficits in Mali are primarily financed through borrowing. These findings stress the need for fiscal reforms in Mali, focusing on tax efficiency, prudent expenditure, and sustainable debt management to prevent macroeconomic instability.