Unveiling the Impact of Public Debt on Donor Funding for Renewable Energy in African Countries

Bridging the renewable energy funding gap in African countries remains a major challenge, as domestic resources are often insufficient to support capital-intensive investments. In this context, donor financing, particularly grants and concessional loans, is vital for supporting the energy transition. This paper examines the effect of public debt on donor financing for renewable energy in twenty-eight African countries over the period 2000–2023. Using Driscoll–Kraay standard errors, Panel-Corrected Standard Errors (PCSE), and Feasible Generalized Least Squares (FGLS) techniques, we identify a significant nonlinear relationship, indicating an inverted U-shaped effect of public debt on donor financing. The results also show a negative effect of total debt service on donor financing support, while the role of institutional quality appears to be moderately important. These findings underline the importance of maintaining sustainable debt levels and effective debt management to attract donor financing and support the energy transition.