Selected Issues Papers

Securing Fiscal Discipline and Credibility in WAEMU

Author/Editor:

Ljubica Dordevic ; Olivia Y Ibrahim

Publication Date:

May 17, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Fiscal consolidation and the reintroduction of the WAEMU fiscal framework is crucial for maintaining debt sustainability, external viability, and financial stability. The 3 and 70 percent of GDP deficit and debt ceilings envisaged by the expired rule remain appropriate, while addressing the stock-flow adjustments will help rebuild fiscal buffers. Convergence to a fiscal deficit of 3 percent of GDP should be ensured by 2025— barring exceptional circumstances—with focus on domestic revenue mobilization, while controlling expenditure. To secure fiscal discipline and credibility, it is essential to revamp the fiscal rule with a credible debt correction mechanism and exogenous escape clauses.

Series:

Selected Issues Paper No. 2024/012

Subject:

International organization Monetary policy

Frequency:

Regular