Highest Ratio Of Government Expenditure to GDP in Sub-Saharan Africa 2021

Government expenditure refers to money spent by the public sector for the acquisition of goods and provision of services such as education, healthcare, social protection, defense, and more. When the government acquires goods and services to satisfy the individual and collective needs and requirements of the community, it is known as government financial consumption spending.

Government expenditure also refers to government investments; goods and services acquired for future use, including public consumption, public investment, and transfer payments consisting of income transfers.

Gross Domestic Product (GDP) is the total market value of all the finished goods and services produced within a country’s borders during a specific period, usually on an annual basis. GDP is used to estimate the growth rate and size of a country’s economy.

According to IMF in 2021, the ratio of government expenditure to GDP in Lesotho was 50.9% with a Gross Domestic Product (GDP) of 2.6 billion U.S dollars, representing the highest percentage in sub-Saharan Africa. 

Seychelles’ government’s expenditure to GDP was 46.3% with a GDP of 950 million U.S dollars, while South Sudan with a GDP of 4.46 billion U.S dollars has a ratio of government expenditure to GDP of 43.2%.

Liberia in 2021 had the lowest ratio of government expenditure to GDP of 30.50%, with a GDP of 3.37 billion U.S dollars.

GDP is used to ascertain the health of a country’s economy. It is used to determine if a country is in an expansion or a recession. A country is in an expansion when there is a growth in GDP for more than two consecutive years and is characterized by the growth of per capita income, an increase in employment, an increase in consumer expenditure, an increase in equity markets, increase in investments, etc. 

In the same vein, a country is in a recession when there is a significant decline in its economic activities which lasts more than two consecutive quarters. It is characterized by a decline in employment, international trade, stock market values, industrial production, investments, etc. The causes of a recession include high inflation, overproduction, high-interest rates, and lack of customer confidence in the economy. 

While increased government expenditure is not necessarily bad, it is important for governments to ensure that these funds are spent on capital projects capable of birthing necessary infrastructure for the development of the nation and increasing the welfare of its citizens.