## Monitoring and Managing Fiscal Risks in the East African Community (_afr1507)

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---

### Overview and context
- Objective: take stock of main fiscal risks facing EAC partner countries (Burundi, Kenya, Rwanda, Tanzania, Uganda) in the context of convergence to the East African Monetary Union (EAMU) and to begin to quantify potential magnitudes.
- Fiscal risk definition: possibility of deviations of fiscal outcomes from what was expected at the time of the budget or other forecast.
- Key common sources of fiscal risk:
  - Natural disasters
  - Shocks to exchange rates and interest rates
  - Bail-outs of banks, public enterprises, pension funds, and local governments
  - Contingent liabilities including guarantees and PPPs
  - Legal claims against government
  - Inaccurate or nontransparent fiscal accounts
- Regional context:
  - EAMU convergence criterion includes a 50 percent of GDP ceiling on public debt (PV basis) to be assessed from 2021.
  - Debt vulnerabilities can be underestimated by headline indicators.

### Macroeconomic shocks — baseline, scenarios, and probabilistic assessment
- Baseline (DSAs conducted in 2014) — PV of public debt-to-GDP Ratio — Baseline (2021):
  - Burundi: 17
  - Kenya: 36
  - Rwanda: 18
  - Tanzania: 33
  - Uganda: 30
- Alternative scenario shocks — PV of debt-to-GDP (2021):
  - A1. Real GDP growth slows by 2.0 percent each year:
    - Burundi: 29
    - Kenya: 56
    - Rwanda: 33
    - Tanzania: 48
    - Uganda: 45
  - A2. Interest rates on domestic debt are 350 basis points higher:
    - Burundi: 19
    - Kenya: 41
    - Rwanda: 19
    - Tanzania: 35
    - Uganda: 33
  - A3. Interest rates on foreign debt are 200 basis points higher:
    - Burundi: 18
    - Kenya: 38
    - Rwanda: 21
    - Tanzania: 37
    - Uganda: 33
  - A4. Exchange rate depreciates by 4 percent more each year:
    - Burundi: 20
    - Kenya: 38
    - Rwanda: 23
    - Tanzania: 38
    - Uganda: 33
  - A5. Combined A1–A4 (all shocks simultaneously):
    - Burundi: 39
    - Kenya: 71
    - Rwanda: 44
    - Tanzania: 65
    - Uganda: 59
- Debt-to-GDP Ratio (nominal) — Baseline and scenarios:
  - Baseline nominal Debt-to-GDP:
    - Burundi: 19
    - Kenya: 41
    - Rwanda: 28
    - Tanzania: 44
    - Uganda: 38
  - A1. Real GDP growth slows by 2.0 percent each year (nominal):
    - Burundi: 32
    - Kenya: 62
    - Rwanda: 44
    - Tanzania: 61
    - Uganda: 55
  - A2. Interest rates on domestic debt are 350 basis points higher (nominal):
    - Burundi: 22
    - Kenya: 46
    - Rwanda: 29
    - Tanzania: 47
    - Uganda: 41
  - A3. Interest rates on foreign debt are 200 basis points higher (nominal):
    - Burundi: 21
    - Kenya: 43
    - Rwanda: 31
    - Tanzania: 48
    - Uganda: 41
  - A4. Exchange rate depreciates by 4 percent more each year (nominal):
    - Burundi: 23
    - Kenya: 46
    - Rwanda: 38
    - Tanzania: 54
    - Uganda: 45
  - A5. Combined A1–A4 (nominal):
    - Burundi: 44
    - Kenya: 79
    - Rwanda: 60
    - Tanzania: 83
    - Uganda: 73
- Baseline macro assumptions (averages for 2015–21):
  - Real growth:
    - Burundi: 5.3
    - Kenya: 6.9
    - Rwanda: 7.4
    - Tanzania: 7.0
    - Uganda: 7.1
  - Interest rate on domestic debt:
    - Burundi: 7.3
    - Kenya: 9.1
    - Rwanda: 0.5
    - Tanzania: 7.0
    - Uganda: 11.0
  - Interest rate on external debt:
    - Burundi: 1.1
    - Kenya: 2.4
    - Rwanda: 2.0
    - Tanzania: 2.2
    - Uganda: 2.2
  - Annual nominal depreciation (+):
    - Burundi: 2.5
    - Kenya: 0.3
    - Rwanda: 3.0
    - Tanzania: 2.7
    - Uganda: 3.6
- Fan-chart simulations (complete probability distribution):
  - Thousands of simulated future paths generated from pooled quarterly data for 1993–2013 to estimate joint distribution and correlations.
  - Result: macroeconomic shocks alone are unlikely to push PV government debt-to-GDP beyond the 50-percent threshold for all EAC partner states in the early 2020s.
  - Probabilities of exceeding the 50-percent PV debt threshold in early 2020s:
    - Probability exceeds 5 percent only in Kenya and Tanzania.
    - Probability is less than 1 percent in Burundi, Rwanda, and Uganda.
- Interpretation:
  - Largest individual-impact shocks: slowdown in real GDP growth and exchange-rate depreciation.
  - Macroeconomic shocks are potentially significant but, given low starting debt ratios and benign baselines, do not by themselves imply a high likelihood of breaching the EAMU debt threshold in 2021.
  - Interaction with other risks (public enterprises, PPPs, pensions, large infrastructure projects, institutional weaknesses) can increase fiscal vulnerability.

### Public enterprises (PEs): scale, performance, and oversight risks
- Definition: follows the United Nations system definition of public enterprises; excludes departmental agencies, commissions, and nonprofit public agencies.
- Employment and sectors:
  - Public-enterprise employees generally represent between 1 and 3 percent of total employment.
  - Specific highlighted figure: 1.5 percent of total employment in Kenya (Table 2.1.1).
  - Sectors: transportation, environment, energy, communications, agriculture, finance; Kenya and Tanzania own port authorities; Uganda has a national forest authority.
- Scale and fiscal significance:
  - Based on available data gathered from the authorities, public enterprises account for almost 10 percent of turnover in the economy (formal private sector and public enterprises) in Kenya and Tanzania.
  - Collectively, public enterprises pose macroeconomically relevant fiscal risks and periodically require sizable transfers from the central government to cover losses.
- Country aggregate outcomes (selected):
  - Tanzania and Uganda: aggregate profit and loss account (after transfers) broadly in balance, excluding losses of national electricity companies.
  - Kenya: national electricity company generated profits while public-enterprise sector outside electricity incurred sizable losses.
  - Rwanda: utilities budget position in balance; slight aggregate deficit for other public enterprises.
  - Burundi: electricity company made profits in 2012 but remains weak; public-enterprise sector suggests a small aggregate surplus though data on subsidies is lacking.
- Examples of fiscal impact:
  - Public utilities examples of losses: 0.7 percent of GDP in Kenya and 1.6 percent of GDP in Uganda.
  - Burundi water and electricity company profit after tax in 2012: $2.4 million (0.1 percent of GDP).
  - Kenya: transfers to public enterprises were equivalent to 5 percent of GDP between 2005 and 2010; in FY2011/12, 11 state corporations made losses.
  - Rwanda: transfers to parastatals slightly less than 1 percent of GDP per year over the past five years; Rwandair continues to make losses after these transfers.
  - Tanzania: aggregate net income close to balance in FY2012/13, masking wide differences and large government subventions to some parastatals.
  - Uganda: except for electricity sector, subsidies to parastatals decreased to about 0.4 percent of GDP; main loss-making enterprise: telecom company, losses of more than 0.3 percent of GDP in FY2010/11.
- Oversight and reporting weaknesses:
  - Quality, timeliness, and coverage of information on PEs need improvement.
  - Too few annual reports publicly available; reporting to parliaments on sector-wide performance is limited.
  - Timely information to ministries of finance is hampered by delays and data weaknesses.
  - PEFA scores for monitoring public enterprises are about or below the global average.
- Country oversight frameworks (selected points):
  - Burundi: 1998 decree requires reporting; implementation has lapsed.
  - Kenya: Department of Government Investment and Public Enterprises oversees; reform proposals include reducing GOEs by 28 percent and establishing a Government Investment Corporation (GIC).
  - Rwanda: Government Portfolio Monitoring Unit monitors; audited reports not comprehensive.
  - Tanzania: Treasury Registrar prepares annual report; TR published summary information first in November 2014.
  - Uganda: Parastatal Monitoring Unit monitors; audits generally delayed.

### Large infrastructure projects and PPPs — scale and fiscal implications
- Aggregate project pipeline:
  - Combined value of projects under consideration in the EAC is in excess of US$90 billion, or about 70 percent of the combined GDP of the EAC countries in 2014.
  - Projects at varying planning stages; some may not proceed.
- Key regional projects:
  - Standard gauge railway: about 2,900 kilometers linking Mombasa, Nairobi, Kampala, and Kigali; expected operational by December 2018.
  - Oil-related infrastructure: refinery in Uganda; crude oil pipeline linking Hoima with the Kenyan coast; refined products pipeline linking Mombasa, Nairobi, and Eldoret with Uganda and eventually Rwanda.
- Country project pipeline highlights:
  - Burundi: hydropower financing identified US$270 million (five-year horizon); adds 67 megawatts.
  - Kenya: plans for about US$47 billion of projects over 2014–17; Kenyan segment of SGR (Mombasa to Nairobi) US$3.8 billion; roads ~US$3 billion; airport terminals ~US$1 billion.
  - Rwanda: pipeline of 24 projects through 2019 — energy US$1.2 billion, transport US$1.2 billion, water US$0.3 billion — together about 34 percent of 2014 GDP; new airport US$750 million; regional railway share US$1.5 billion under discussion.
  - Tanzania: US$1.2 billion domestic gas pipeline; two Kinyerezi power plants cost US$474 million; Big Results Now initiative total US$13 billion; potential Bagamoyo port project US$10 billion.
  - Uganda: pipeline of at least US$9.2 billion (35 percent of GDP) including roads, hydropower, railway, pipelines, and a refinery.
- Fiscal risks from projects:
  - Depend on whether projects are included in fiscal frameworks.
  - Risks include cost overruns, delays, realization of contingencies, addition to fiscal deficits and debt if not financed privately.
  - IMF staff note much project financing remains to be negotiated; most countries planning to use nonconcessional borrowing.
- PPPs and fiscal risk specifics:
  - PPPs allow deferred spending; expenditures often recorded later (at project completion).
  - Contracts contain uncertain cost elements: loans’ amortization; interest payments; equity returns; operational and maintenance costs including insurance; government guarantees.
  - Main risks: construction delays, litigation, increases in financing costs, optimistic assumptions leading to guarantees being called, and state-owned entities ill-equipped to manage large projects.
  - Contract value of PPP commitments over the past decade shown by country (World Bank data): Burundi, Rwanda, Tanzania, Kenya, Uganda (percent of 2012 GDP).

### Pensions: structure, trends, and fiscal risks
- Structure and coverage:
  - Public pension spending varies across EAC countries; only Kenya has a universal pension payment for the elderly older than age 65.
  - Most government schemes are operated on a defined benefit basis.
  - Burundi, Rwanda, and Tanzania include contributions from both employee and government.
  - Kenya and Uganda schemes are noncontributory.
  - All countries also have privately managed pension funds and voluntary schemes.
- Pension expenditure (percent of GDP):
  - Burundi: 2010–11 0.28; 2011–12 0.35; 2012–13 0.34; 2013–14 0.36
  - Kenya: 2010–11 0.46; 2011–12 0.54; 2012–13 0.55; 2013–14 0.60
  - Rwanda: 2010–11 0.22; 2011–12 0.23; 2012–13 0.23; 2013–14 0.25
  - Tanzania: 2010–11 0.19; 2011–12 0.20; 2012–13 0.17; 2013–14 0.15
  - Uganda: 2010–11 0.58; 2011–12 0.51; 2012–13 0.52; 2013–14 0.41
- Key pension risks and drivers:
  - Pension spending bound to grow due to demographic developments (increase in number of retirees and improvements in life expectancy).
  - Noncontributory schemes will directly affect the budget; contributory schemes could affect the budget indirectly if contribution rates or benefits are not adjusted.
  - Risk of lower-than-expected returns on pension fund assets: portfolios mostly invested domestically, mostly in government bonds; limited investment expertise; generally low investment returns; cases of mismanagement.

### Institutional sources of fiscal risks and subnational issues
- Five priority institutional weaknesses:
  1. Quality, timeliness, and coverage of reported fiscal data.
  2. Expenditure allocation and control.
  3. Oversight of subnational governments.
  4. Revenue forecasting and administration.
  5. Risks related to natural resource wealth management.
- Data quality and transparency:
  - Timely data coverage often restricted to central government; little data on wider public sector.
  - IMF staff analysis (2013) key findings:
    - None of the EAC countries meet benchmarks related to independent production and audit of financial data.
    - In none of the countries are financial data produced by an independent statistics agency; only in Tanzania are data audited to international standards by an independent auditor.
    - Only in Rwanda are data presented on a general government basis in the budget.
- Expenditure allocation and control:
  - Weak internal controls and unforeseen external events can cause expenditure overruns and arrears.
  - Analysis of 2000–12 shows actual expenditure exceeded one-year and two-year ahead forecasts, particularly in Tanzania.
  - PEFA assessments indicate Uganda and Burundi have particularly low assessments on institutional expenditure control.
  - Notable arrears problems in Burundi and Tanzania (data from 2010–11).
- Oversight of local governments — devolution:
  - Fiscal devolution significant and increasing (notably in Kenya).
  - In Kenya, Rwanda, and Uganda local governments execute about 17 percent of general government expenditure on a releases basis; in Tanzania this share exceeds 20 percent.
  - Box 3.1 selected numeric facts:
    - Kenya: minimum of 15 percent of central government domestic revenues to be transferred to the 47 county governments per 2010 constitution; subnational expenditures increased from about 1 percent of GDP in 2012–13 to about 4.5 percent of GDP in 2013–14.
    - Rwanda: district taxes and fees ~16 percent of total revenue; grants increased to about 5 percent of GDP in 2013.
    - Tanzania: local government-owned revenues ~0.5 percent of GDP; budgetary allocations to local government authorities in FY2013/14 amounted to 21 percent of total expenditure; local governments’ own resources ~2 percent of total expenditure on a cash release basis.
    - Uganda: in 2013/14 local governments received about 3 percent of GDP in transfers from the central government.
- Revenue forecasting and administration:
  - Revenue shortfalls from weak administration or weaker activity create fiscal risk.
  - PEFA results: Kenya and Rwanda had low assessments in effectiveness of tax payments collection; Tanzania received low scores on taxpayer registration and assessment.
- Natural resource wealth management:
  - Recent discoveries (see Box 3.2) create potential transformational revenues but also risks of volatility, borrowing based on expected revenues, Dutch disease, and intergenerational trade-offs.
  - Preparatory legal/institutional steps (example: Uganda 2015 Public Financial Management Act — minister to submit charter for fiscal responsibility; petroleum revenue to be used for financing infrastructure and government development projects, not for recurrent expenditures).

### Natural resource discoveries — estimates and fiscal considerations
- Recent discoveries and estimated resources:
  - Kenya: preliminary estimates well over 600 million barrels of oil (South Lokichar basin); potential >100,000 bbl/d.
  - Uganda: oil reserves estimated at 6.5 billion barrels; targeting gross oil production of more than 200,000 bbl/d.
  - Tanzania: offshore natural gas discoveries total 25 to 30 trillion cubic feet of recoverable deep offshore gas resources.
- Macroeconomic and fiscal risks:
  - Borrowing and fiscal position could deteriorate if borrowing increases are based on expectations for resource revenues that do not materialize.
  - Revenue volatility from commodity prices can cause boom-and-bust cycles.
  - Exhaustibility creates trade-offs between current spending and saving for future generations.
- Recommended institutional and budgetary framework:
  - Establish sound, transparent policy framework to constrain discretion and promote fiscal discipline while isolating the budget from price volatility.
  - Suggested mechanisms: medium-term fiscal rules; resource funds; fiscal responsibility laws.
  - Budget integration principle: resource revenue flows should be fully integrated into the budget; all spending from resource revenues should be subject to parliamentary oversight.
  - Preparatory steps before revenue arrival: robust medium-term budget framework; strengthen budget implementation, execution, and reporting; forward expenditure ceilings linked to medium-term fiscal policy objectives.

### Policy implications and key recommendations
- Strengthen monitoring and oversight of public enterprises, including consolidated reporting covering the full public sector.
- Enhance the quality, timeliness, and coverage of fiscal data and disclosure practices (statements of fiscal risks and budget documents).
- Quantify and disclose major contingent liabilities, including guarantees and potential fiscal costs of PPPs.
- Incorporate sensitivity analysis and probabilistic assessments (fan charts) into fiscal planning to show potential breaches of convergence criteria and inform policymakers.
- Recognize correlations across risk types (e.g., low growth, public enterprise losses) and design contingency and fiscal buffers to respond to combined shocks.
- Improve institutional frameworks for expenditure control, revenue forecasting, subnational oversight, and natural resource management to reduce fiscal vulnerabilities.
- Regional and legal measures:
  - Report fiscal risks in public documents accompanying the budget (statement of fiscal risks).
  - Fiscal risks should be considered by regional institutions monitoring and enforcing EAMU criteria.
  - Enshrine EAMU commitments in national legislation to support monitoring and enforcement.
- IMF support:
  - IMF stands ready to continue support through technical assistance, fiscal transparency evaluations, and policy dialogue with country authorities.

*Prepared by IMF staff as summarized in "Monitoring and Managing Fiscal Risks in the East African Community."*

### 1. East African Community. 2. East African Monetary Union 3. Fiscal risks

### Monitoring and Managing Fiscal Risks in the East African Community

### Overview
- Objective: take stock of main fiscal risks facing EAC partner countries (Burundi, Kenya, Rwanda, Tanzania, Uganda) in the context of convergence to the East African Monetary Union (EAMU) and to begin to quantify potential magnitudes.
- Definition: fiscal risks are the possibility of deviations of fiscal outcomes from what was expected at the time of the budget or other forecast.
- Key common sources of fiscal risk: natural disasters; shocks to exchange rates and interest rates; bail-outs of banks, public enterprises, pension funds, and local governments; contingent liabilities including guarantees and PPPs; legal claims against government; inaccurate or nontransparent fiscal accounts.
- Regional context: EAMU convergence criteria include a 50 percent of GDP ceiling on public debt (PV basis) to be assessed from 2021; debt vulnerabilities can be underestimated by headline indicators (lessons cited from Greece, Portugal, Spain/Ireland).

### Macroeconomic Shocks — Findings and Projections
- Baseline (from DSAs conducted in 2014): present value (PV) of public debt-to-GDP ratio for 2021 (table entries labeled "PV of Debt-to-GDP Ratio — Baseline"):
  - Burundi: 17
  - Kenya: 36
  - Rwanda: 18
  - Tanzania: 33
  - Uganda: 30
- Alternative scenario shocks applied individually and jointly (impact on PV of debt-to-GDP in 2021):
  - A1. Real GDP growth slows by 2.0 percent each year → PV debt-to-GDP:
    - Burundi: 29
    - Kenya: 56
    - Rwanda: 33
    - Tanzania: 48
    - Uganda: 45
  - A2. Interest rates on domestic debt are 350 basis points higher → PV debt-to-GDP:
    - Burundi: 19
    - Kenya: 41
    - Rwanda: 19
    - Tanzania: 35
    - Uganda: 33
  - A3. Interest rates on foreign debt are 200 basis points higher → PV debt-to-GDP:
    - Burundi: 18
    - Kenya: 38
    - Rwanda: 21
    - Tanzania: 37
    - Uganda: 33
  - A4. Exchange rate depreciates by 4 percent more each year → PV debt-to-GDP:
    - Burundi: 20
    - Kenya: 38
    - Rwanda: 23
    - Tanzania: 38
    - Uganda: 33
  - A5. Combined A1–A4 (all shocks simultaneously) → PV debt-to-GDP:
    - Burundi: 39
    - Kenya: 71
    - Rwanda: 44
    - Tanzania: 65
    - Uganda: 59
- Debt-to-GDP Ratio (nominal) baseline and shocks (table entries labeled "Debt-to-GDP Ratio — Baseline" and scenarios):
  - Baseline nominal Debt-to-GDP:
    - Burundi: 19
    - Kenya: 41
    - Rwanda: 28
    - Tanzania: 44
    - Uganda: 38
  - A1. Real GDP growth slows by 2.0 percent each year → nominal Debt-to-GDP:
    - Burundi: 32
    - Kenya: 62
    - Rwanda: 44
    - Tanzania: 61
    - Uganda: 55
  - A2. Interest rates on domestic debt are 350 basis points higher → nominal Debt-to-GDP:
    - Burundi: 22
    - Kenya: 46
    - Rwanda: 29
    - Tanzania: 47
    - Uganda: 41
  - A3. Interest rates on foreign debt are 200 basis points higher → nominal Debt-to-GDP:
    - Burundi: 21
    - Kenya: 43
    - Rwanda: 31
    - Tanzania: 48
    - Uganda: 41
  - A4. Exchange rate depreciates by 4 percent more each year → nominal Debt-to-GDP:
    - Burundi: 23
    - Kenya: 46
    - Rwanda: 38
    - Tanzania: 54
    - Uganda: 45
  - A5. Combined A1–A4 → nominal Debt-to-GDP:
    - Burundi: 44
    - Kenya: 79
    - Rwanda: 60
    - Tanzania: 83
    - Uganda: 73
- Baseline macro assumptions (averages for 2015–21):
  - Real growth:
    - Burundi: 5.3
    - Kenya: 6.9
    - Rwanda: 7.4
    - Tanzania: 7.0
    - Uganda: 7.1
  - Interest rate on domestic debt:
    - Burundi: 7.3
    - Kenya: 9.1
    - Rwanda: 0.5
    - Tanzania: 7.0
    - Uganda: 11.0
  - Interest rate on external debt:
    - Burundi: 1.1
    - Kenya: 2.4
    - Rwanda: 2.0
    - Tanzania: 2.2
    - Uganda: 2.2
  - Annual nominal depreciation (+):
    - Burundi: 2.5
    - Kenya: 0.3
    - Rwanda: 3.0
    - Tanzania: 2.7
    - Uganda: 3.6
- Complete probability distribution (fan-chart) simulations:
  - Thousands of simulated future paths generated from pooled quarterly data for 1993–2013 to estimate joint distribution and correlations.
  - Result: macroeconomic shocks alone are unlikely to push PV government debt-to-GDP beyond the 50-percent threshold for all EAC partner states in the early 2020s.
  - Probabilities of exceeding the 50-percent PV debt threshold in early 2020s:
    - Probability exceeds 5 percent only in Kenya and Tanzania.
    - Probability is less than 1 percent in Burundi, Rwanda, and Uganda.
- Interpretation:
  - Largest individual-impact shocks are a slowdown in real GDP growth and an exchange-rate depreciation.
  - Macroeconomic shocks are potentially significant but, given low starting debt ratios and benign baselines, do not by themselves imply a high likelihood of breaching the EAMU debt threshold in 2021.
  - Other risks (public enterprises, PPPs, pensions, large infrastructure projects, institutional weaknesses) can interact with macro shocks and increase fiscal vulnerability.

### Specific Risks — Public Enterprises (PEs) and Related Findings
- Role and information gaps:
  - Public enterprises continue to play an important role in EAC economies despite privatizations.
  - Quality, timeliness, and coverage of information on scale and financial performance of PEs need improvement.
  - Lack of consolidated public sector data (including PEs) prevents proper monitoring and risk management.
  - Public enterprises are sufficiently important to pose significant fiscal risks—most require fiscal transfers and there have been many cases of bail-outs.
- Scale indicator noted in text:
  - Based on available data gathered from the authorities, public enterprises account for almost 10 percent of turnover in the economy (formal private sector and public enterprises) in Kenya and Tanzania.

### Other Specific Risks (topics identified for analysis in the paper)
- Large infrastructure projects: flagged as a source of fiscal risk; some projects under preparation in the EAC are noted in the full chapter listing (Box 2.3 referenced).
- Public-Private Partnerships (PPPs): guarantees and contingent liabilities embedded in PPPs can impose fiscal costs (evidence from Portugal cited).
- Pensions: pension arrangements and related fiscal exposures are reviewed (Box 2.5 referenced).
- Interactions: weak financial performance of public enterprises is correlated with low economic growth and may generate need for additional central government fiscal support.

### Institutional Sources of Fiscal Risks — Key Themes
- Data quality and transparency:
  - Deficiencies in the quality, timeliness, and coverage of reported fiscal data increase fiscal risks.
- Expenditure allocation and control:
  - Weak expenditure control mechanisms can exacerbate fiscal slippages and arrears (Figures and PEFA scores referenced).
- Oversight of local governments—devolution:
  - Decentralization introduces oversight challenges and potential subnational fiscal risks.
- Revenue forecasting and administration:
  - Forecasting and revenue administration weaknesses can create downside risks to fiscal projections.
- Natural resource wealth management:
  - Risks related to discoveries and management of natural resources are identified as a source of fiscal volatility.

### Policy Implications and Recommendations (as emphasized in the text)
- Strengthen monitoring and oversight of public enterprises, including consolidated reporting covering the full public sector.
- Enhance the quality, timeliness, and coverage of fiscal data and disclosure practices (statements of fiscal risks and budget documents).
- Quantify and disclose major contingent liabilities, including guarantees and potential fiscal costs of PPPs.
- Incorporate sensitivity analysis and probabilistic assessments (fan charts) into fiscal planning to show potential breaches of convergence criteria and inform policymakers.
- Recognize correlations across risk types (e.g., low growth, public enterprise losses) and design contingency and fiscal buffers to respond to combined shocks.
- Improve institutional frameworks for expenditure control, revenue forecasting, subnational oversight, and natural resource management to reduce fiscal vulnerabilities.

*Prepared by IMF staff as summarized in "Monitoring and Managing Fiscal Risks in the East African Community."*

### 1.5 percent of total employment in Kenya (Table 2.1.1).

### _afr1507 - 1.5 percent of total employment in Kenya (Table 2.1.1).

### Definition and scope
- Follows the United Nations system definition of public enterprises as “any commercial undertaking owned by public authority, either wholly or through majority shareholding, which is engaged in the sale of goods and services and whose affairs are capable of being recorded in balance sheets and profit and loss accounts.”
- Definition excludes departmental agencies, commissions, and nonprofit public agencies.
- Kenya uses the October 2013 Kenyan Report of the Presidential Taskforce on Parastatal Reforms; the Kenya report additionally distinguishes between commercially operated enterprises and those with a strategic function not required to make profits.

### Sectors and employment
- Public enterprises operate across transportation (aviation and railway authorities); environment (conservation and water authorities); energy (oil companies and electricity—generation, transmission, and distribution services split in Kenya and Uganda, combined in Rwanda and Tanzania); communications (printing, broadcasting and entertainment, and postal system); agriculture (seed, fertilizer, and genetics companies); and finance.
- Kenya and Tanzania own port authorities; Uganda has an important national forest authority.
- Public-enterprise employees generally represent between 1 and 3 percent of total employment; reported high number in Rwanda may reflect better data.
- Specific highlighted figure: 1.5 percent of total employment in Kenya (Table 2.1.1).

### Financial performance and fiscal risks
- Collectively, public enterprises pose macroeconomically relevant fiscal risks and periodically require sizable transfers from the central government to cover losses.
- Variation across enterprises: some are chronic loss-makers; some have performance dependent on commodity prices and weather; some reliably generate profits.
- Fiscal risks arise when public enterprises fail to generate adequate profits despite privileged positions (monopoly, control of natural resources) or fail to remit profits to the treasury through taxes and dividends.
- As natural resources gain importance, public enterprises involved in the sector will require further disclosure and appropriate management.

### Aggregate country outcomes (summarized)
- Tanzania and Uganda: aggregate profit and loss account (after transfers) of public enterprises broadly in balance, excluding losses of national electricity companies (Table 2.1).
- Kenya: national electricity company generated profits while public-enterprise sector outside electricity incurred sizable losses.
- Rwanda: utilities budget position in balance; slight aggregate deficit for other public enterprises.
- Burundi: electricity company made profits in 2012 but remains weak; public-enterprise sector suggests a small aggregate surplus though data on subsidies is lacking.

### Box 2.1 — Country specifics on financial position and employment
- General: public enterprises have generally been making losses, with only Uganda and Burundi showing a positive aggregate balance (in 2010/11).
- Public utilities examples of losses: 0.7 percent of GDP in Kenya and 1.6 percent of GDP in Uganda.
- Burundi:
  - Burundi water and electricity company made a slight profit after tax of $2.4 million in 2012 (0.1 percent of GDP).
  - Small profits projected through 2018.
- Kenya:
  - Transfers to public enterprises were equivalent to 5 percent of GDP between 2005 and 2010.
  - In FY2011/12, 11 state corporations made losses.
- Rwanda:
  - Transfers to parastatals slightly less than 1 percent of GDP per year over the past five years.
  - Rwandair continues to make losses after these transfers.
- Tanzania:
  - Aggregate net income close to balance in FY2012/13, masking wide differences among enterprises and large government subventions to some parastatals.
  - Strong performers: National Housing Corporation and Tanzania Ports Authority.
  - Largest losses: TANESCO (power utility); others include Air Tanzania, water utilities, Tanzania Broadcasting Corporation, Tanzania Telecommunication Corporation Limited (joint venture with Airtel), Tanzania-Zambia Railways Authority, and public universities and colleges.
- Uganda:
  - Except for electricity sector, subsidies to parastatals decreased to about 0.4 percent of GDP.
  - Main loss-making enterprise: telecom company, which made losses of more than 0.3 percent of GDP in FY2010/11.

### Oversight and reporting
- Rules for oversight exist, but practical implementation of financial reporting needs improvement; lack of effective monitoring and oversight can entail significant fiscal risks.
- Too few annual reports of public enterprises are publicly available; reporting to parliaments on sector-wide financial performance is limited.
- Timely information to ministries of finance is hampered by delays and data weaknesses.
- All EAC countries received PEFA scores in monitoring public enterprises that are about or below the global average.

### Box 2.2 — Country oversight frameworks and implementation
- Burundi:
  - 1998 decree requires reporting to the Service Chargé des Entreprises Publiques; Audit Court authorized to audit.
  - Implementation has lapsed; World Bank assistance to revamp framework.
- Kenya:
  - Department of Government Investment and Public Enterprises oversees public enterprises; monitoring could be enhanced.
  - Since 2005, management performance contracts with parent ministry; Permanent Secretary a member of managing board.
  - Public Audit Act 2003 requires submission of financial accounts to parent ministry and Ministry of Finance within three months of year end; compliance information limited.
  - Recent reform proposals include reducing GOEs by 28 percent, grouping entities into five components, and exercising shareholding via a Government Investment Corporation (GIC).
  - Boards to be restricted to seven to nine members; GIC to monitor performance.
- Rwanda:
  - Monitored by Government Portfolio Monitoring Unit; accounts audited by external auditors and normally presented to parliament within 10 months.
  - Audited reports not comprehensive due to unavailability of data from some public enterprises (example: EWSA audit not signed off).
- Tanzania:
  - Public enterprises accountable to boards; parent ministry provides oversight; water and electricity utilities regulated by independent regulator.
  - Treasury Registrar (TR) prepares annual report to parliament including list of public enterprises, equity holdings, loans and guarantees, transfers, loan repayments and arrears, and dividends.
  - TR compiles summary information on financial performance; first published in November 2014.
- Uganda:
  - Most monitored by Parastatal Monitoring Unit.
  - Public enterprises must submit financial accounts to parent ministry and auditor general within three months; audits generally delayed due to workload.

### Large infrastructure projects and fiscal implications
- All EAC partner states plan significant scaling-up of infrastructure investment; combined value of all projects under consideration is in excess of US$90 billion, or about 70 percent of the combined GDP of the EAC countries in 2014.
- Projects at varying planning stages; some may not proceed due to financing or operational challenges.
- Key regional projects include:
  - Construction of the standard gauge railway: about 2,900 kilometers linking Mombasa, Nairobi, Kampala, and Kigali; expected operational by December 2018 with eventual extension to Juba.
  - Oil-related infrastructure: refinery in Uganda; crude oil pipeline linking Hoima with the Kenyan coast; refined products pipeline linking Mombasa, Nairobi, and Eldoret with Uganda and eventually Rwanda.
- Fiscal risks depend on whether projects are included in fiscal frameworks; risks include cost overruns, delays, realization of contingencies, potential addition to fiscal deficits and debt burden if not financed privately or offset by savings.
- IMF staff note some project financing remains to be negotiated or planned, with most countries planning to use nonconcessional borrowing.

### Box 2.3 — Country project pipelines (highlights)
- Burundi:
  - Hydropower projects with identified financing of US$270 million (five-year horizon), adding 67 megawatts, tripling capacity from 2012 base; mainly concessional lending and some budget resources.
- Kenya:
  - Plans for about US$47 billion of projects over 2014–17 across energy, ports, roads, railways, ICT, oil pipelines, and refineries.
  - Current fiscal framework includes: phase one of Kenyan segment of Standard Gauge Railway (Mombasa to Nairobi, US$3.8 billion plus insurance, over 40 months) funded by semiconcessional loan from China ́s Exim Bank; roads projects ~US$3 billion financed by annuities; airport terminals ~US$1 billion financed by development partners; government share of large energy projects.
  - Other big projects not yet in fiscal framework: transport corridor to South Sudan and Ethiopia expected to cost about US$5 billion, to be financed through PPPs.
- Rwanda:
  - Pipeline of 24 projects through 2019: energy US$1.2 billion, transport US$1.2 billion, water US$0.3 billion — together about 34 percent of 2014 GDP.
  - Government budgeted US$880 million over next few years; remainder expected from concessional and nonconcessional borrowing and grants.
  - New airport (US$750 million) and Rwanda’s share of regional railway (US$1.5 billion) under discussion — represent further 28 percent of 2014 GDP.
- Tanzania:
  - New US$1.2 billion pipeline to deliver domestic natural gas to Dar Es Salaam (reflected in DSA and IMF staff reports), financed by China Exim Bank (mix of concessional and nonconcessional lending) with 5-percent government contribution.
  - Two Kinyerezi power plants combined cost US$474 million; additional US$480 million envisaged for increasing generation capacity next year.
  - Nonconcessional borrowing for road projects (US$104 million) and new airport terminal (US$164 million).
  - Several projects under Big Results Now initiative (total US$13 billion) and potential Bagamoyo port project (US$10 billion) with limited detailed plans.
- Uganda:
  - Pipeline of at least US$9.2 billion (35 percent of GDP) including roads, hydropower, railway, pipelines, and a refinery.
  - Financing schemes include PPPs, foreign direct investment, concessional and nonconcessional loans, and budget financing.
  - Two large hydropower projects with financing about to be concluded with China ́s Exim Bank loans and 15 percent of government savings.
  - Financing identified for oil-related road construction; other large projects under discussion include phase one of Ugandan standard gauge railway, highways, and Ayago hydropower plant.

### Public-Private Partnerships (PPPs) and risks
- PPPs receiving increasing attention as financing modality given fiscal constraints.
- EAC partner states are improving PPP frameworks and legislation.
- Fiscal risks from PPPs arise because:
  - PPPs allow deferred spending; expenditures are often recorded later (often at project completion).
  - PPP contracts contain uncertain cost elements: loans’ amortization; interest payments; equity returns; operational and maintenance costs including insurance; and government guarantees.
  - Main risks: construction delays, litigation, increases in financing costs, optimistic assumptions leading to guarantees being called, and state-owned entities ill-equipped to manage large projects.
- Contract value of PPP commitments over the past decade shown by country (World Bank data): Burundi, Rwanda, Tanzania, Kenya, Uganda (percent of 2012 GDP).

*Source: _afr1507 - 1.5 percent of total employment in Kenya (Table 2.1.1).*

### Box 2.4. PPP Frameworks in the Region

### Box 2.4. PPP Frameworks in the Region

### PPP frameworks by country
- Burundi
  - An explicit PPP framework has not been established.
  - PPP issues are dealt with by the second vice president and the Public-Private Dialogue Secretariat.
- Kenya
  - PPP law passed in December 2012.
  - A PPP Committee formed with principal secretaries from relevant departments and experts, supported by a PPP unit in the ministry of finance.
  - Kenya has reached financial closure on 22 PPPs with more than $4 billion committed investments.
- Rwanda
  - A draft PPP law is about to be submitted to parliament.
  - An interministerial PPP steering committee will lead and approve projects, assisted by a PPP unit in the Rwanda Development Board.
  - PPPs currently present in the power and telecom sectors.
- Tanzania
  - A PPP act was passed in 2010 and the Public Procurement Act amended in 2011 to reflect the new legislation.
  - An implementation strategy and action plan and operational guidelines have been developed.
  - So far, US$3.4 billion have been committed to 21 PPPs that include eight power-related PPPs.
- Uganda
  - PPP bill passed in July 2014.
  - The PPP unit, in the Ministry of Finance, supports and advises on PPP issues.
  - Twenty-two projects have reached financial closure, with investment totaling US$3.5 billion and power being the largest sector.

### Preconditions for effective PPP fiscal-risk management
- Project selection and appraisal need to be strong to ensure only good projects are implemented.
- A sound institutional, legal, and regulatory framework is necessary for proper assessment of risks.
- A good budgeting, accounting, and reporting system must be in place to ensure full and transparent disclosure of risks.

### Pensions: structure, trends, and fiscal risks
- Public pension spending varies significantly across EAC countries, reflecting differences in coverage and generosity.
- Only Kenya has a universal pension payment for the elderly older than age 65.
- In other EAC countries, pension payments by the government are mostly directed to retired civil servants and cover old age and disability.
- Most government schemes are operated on a defined benefit basis.
- Burundi, Rwanda, and Tanzania include an element of contribution from both the employee and the government.
- Kenya and Uganda schemes are noncontributory, representing a bigger strain on government finances.
- All EAC countries also have privately managed pension funds and other voluntary schemes.

Box 2.5 — Pension arrangements in the EAC (summary)
- Burundi: mandatory component for government employees (Office National des Pensions et Risques Professionnels) and another component covering employees in the formal sector (Institut National de Sécurité Sociale).
- Kenya: quasi-universal social pension scheme covering people older than age 65 who are very poor; a civil service scheme; and a scheme covering all formal-sector workers (National Social Security Fund).
- Rwanda: public pension system focused around one fund (Rwanda Social Security Board), which also administers a health care insurance.
- Tanzania: mandatory public pension schemes focused around five funds (main ones being the National Social Security Fund, the Public Service Pension Fund, and the Governmental Employees Provident Fund).
- Uganda: covers the public service and other occupation pension schemes under one fund (National Social Security Fund).

Pension expenditure (percent of GDP)
- Burundi: 2010–11 0.28; 2011–12 0.35; 2012–13 0.34; 2013–14 0.36
- Kenya: 2010–11 0.46; 2011–12 0.54; 2012–13 0.55; 2013–14 0.60
- Rwanda: 2010–11 0.22; 2011–12 0.23; 2012–13 0.23; 2013–14 0.25
- Tanzania: 2010–11 0.19; 2011–12 0.20; 2012–13 0.17; 2013–14 0.15
- Uganda: 2010–11 0.58; 2011–12 0.51; 2012–13 0.52; 2013–14 0.41
- Source for table: IMF staff estimates based on authorities' data.

Key pension risks and drivers
- Pension spending bound to grow due to demographic developments (increase in number of retirees and improvements in life expectancy).
- Noncontributory schemes will directly affect the budget; contributory schemes could affect the budget indirectly if contribution rates or benefits are not adjusted.
- Low coverage combined with increasing life expectancy could increase demand for pension coverage, with possible fiscal implications.
- Risk of lower-than-expected returns on pension fund assets:
  - Current portfolios are mostly invested domestically, mostly in government bonds.
  - Generally limited investment expertise within pension schemes.
  - Most schemes have experienced low investment returns over the years.
  - Cases of mismanagement have negatively affected long-term financial health of some schemes.

### Institutional sources of fiscal risks (overview)
- Five areas of institutional weaknesses leading to fiscal risks in EAC partner states:
  1. Quality, timeliness, and coverage of reported fiscal data.
  2. Expenditure allocation and control.
  3. Oversight of subnational governments.
  4. Revenue forecasting and administration.
  5. Risks related to natural resource wealth management.

A. Quality, timeliness, and coverage of reported fiscal data
- Low financial data quality risks inappropriate fiscal decisions.
- Timely data coverage often restricted to central government, with little data on the wider public sector (subnational government and state-owned enterprises).
- Key findings from IMF staff analysis (2013):
  - None of the EAC countries meet the benchmarks related to independent production and audit of financial data.
  - In none of the countries are financial data produced by an independent statistics agency; only in Tanzania are data audited to international standards by an independent auditor.
  - Only in Rwanda are data presented on a general government basis in the budget.

B. Expenditure allocation and control
- If expenditure exceeds budgeted amounts, deficits will be higher than forecast.
- Weak internal controls and unforeseen external events can cause expenditure overruns.
- Analysis of 2000–12 average differences between medium-term expenditure forecasts and outturns (Kenya, Uganda, Tanzania; South Africa for comparison) shows:
  - Actual expenditure exceeded the one-year and two-year ahead forecasts over this period, particularly in Tanzania.
  - Budget-year estimates of expenditure have, on average, been higher than outturns in Uganda and Tanzania, suggesting in-year expenditure plans are not realistic and budget execution is weak.
  - In South Africa, introduction of a binding medium-term expenditure ceiling in 2012 led to outcomes at or below initial estimates, illustrating that well-designed reforms can address institutional risks.
- PEFA assessments indicate Uganda and Burundi have particularly low assessments against most areas of institutional expenditure control.

- Arrears
  - Weak expenditure controls can lead to buildup of arrears.
  - There is a significant problem of arrears in Burundi and Tanzania, based on available data from 2010–11.

C. Oversight of local governments — devolution
- Fiscal devolution is significant in a number of EAC countries and expected to increase substantially in Kenya.
- In Kenya, Rwanda, and Uganda, local governments execute about 17 percent of general government expenditure on a releases basis; in Tanzania this share exceeds 20 percent.
- Devolution benefits and risks:
  - Can increase efficiency, effectiveness, social cohesion, and accountability.
  - Risks include the “common pool” problem, moral hazard (expectation of central government bailouts), overspending, overborrowing, and duplication of functions.
- Institutional measures to control risks:
  - Ensure coordination and consultation, clarity of roles and responsibilities, adequate accounting and reporting, monitoring, auditing, and strong accountability arrangements.
  - Prevent overborrowing through borrowing limits (negotiated agreements, national legislation, or administrative controls).
  - Establish frameworks for subnational borrowing, move toward a unified treasury single account, and involve local governments in PFM legal and regulatory frameworks.

Box 3.1 — Decentralization highlights (selected numeric facts)
- Kenya: The 2010 constitution established that a minimum of 15 percent of central government domestic revenues (based on the latest audited accounts) should be transferred to the 47 county governments. Subnational expenditures increased from about 1 percent of GDP in 2012–13 to about 4.5 percent of GDP in 2013–14, covered almost exclusively by an increase in central government transfers.
- Rwanda: District taxes and fees represent, on average, about 16 percent of total revenue; grants increased to about 5 percent of GDP in 2013, roughly a third of the central government’s domestic revenues.
- Tanzania: Local government-owned revenues are about 0.5 percent of GDP. Budgetary allocations to local government authorities in FY2013/14 amounted to 21 percent of total expenditure; local governments’ own resources amounted to about 2 percent of total expenditure on a cash release basis.
- Uganda: In the 2013/14 budget, local governments received about 3 percent of GDP in transfers from the central government.

D. Revenue forecasting and administration
- Fiscal risk arises if government revenues fall short of forecasts owing to weaker-than-expected economic activity or weak revenue administration.
- Weaknesses in revenue administration can be a known factor when forecasts are made, but become significant when new taxes or reforms are introduced.
- PEFA assessment results on revenue administration:
  - Kenya and Rwanda had particularly low assessments in the effectiveness of tax payments collection.
  - Tanzania received low scores on the effectiveness of taxpayer registration and assessment.

E. Risks related to natural resource wealth management
- Some EAC countries have recently made natural resource discoveries, mostly oil and gas.
- Potential revenues from natural resources, if realized, could be transformational and constitute positive fiscal risks.
- These potential revenues are not included in the fiscal framework and therefore are not reflected in current budgets.

*Source: Box 2.4, _afr1507 - Box 2.4. PPP Frameworks in the Region*

### Box 3.2. Natural Resource Discoveries in the EAC Region

### Box 3.2. Natural Resource Discoveries in the EAC Region

### Recent discoveries and estimated resources
- Kenya:
  - Tullow is leading exploration activities in Kenya's South Lokichar basin.
  - Preliminary estimates of reserves are well over 600 million barrels of oil, according to Tullow’s 2013 annual report.
  - The company estimates that Kenya's South Lokichar basin has the potential to produce more than 100,000 barrels per day (bbl/d) of oil, but development studies are still under way.
- Uganda:
  - Oil reserves are estimated at 6.5 billion barrels.
  - According to Tullow’s 2013 Annual Report, the three leading companies in exploration and development (Tullow, Total, and the China National Offshore Oil Corporation) are targeting gross oil production of more than 200,000 bbl/d.
- Tanzania:
  - Several offshore natural gas discoveries have been made since 2010.
  - Exploration results indicate that discoveries total 25 to 30 trillion cubic feet of recoverable deep offshore gas resources, according to PFC Energy.

### Macroeconomic and fiscal risks from natural resources
- Borrowing and fiscal position:
  - The fiscal position could deteriorate if borrowing increases are based on expectations for natural resource revenues and those revenues do not materialize.
- Revenue volatility:
  - Large fluctuations in natural resource prices introduce a significant source of volatility in revenues once production starts, which can lead to boom-and-bust cycles.
- Exhaustibility and intergenerational trade-offs:
  - Natural resources are exhaustible, creating trade-offs on how much should be spent now versus saved for future generations.
- Other risks:
  - Dutch disease and potential diversion of resources.

### Institutional and budgetary challenges with new resource revenues
- Erosion of budget discipline:
  - The volume of additional revenues can erode aggregate budget discipline without a strong medium-term expenditure framework and enforceable prohibitions on expenditure in excess of appropriated amounts.
- Planning under volatility:
  - The volatility of that revenue poses a problem of ensuring that the related expenditure is planned and spent efficiently and productively.
- Multiple revenue streams and oversight:
  - The many different streams of revenue create challenges around ensuring that resources are all spent in line with the government’s strategic objectives, with approval and oversight from parliament.
- Preparatory legal/institutional steps (example: Uganda):
  - In Uganda, the 2015 Public Financial Management Act requires the minister to submit to parliament, no later than three months after the first sitting of parliament after a general election, a charter for fiscal responsibility that relates to the formulation and implementation of fiscal policy.
  - The ministry is to draft a charter for FY2016/17–FY2020/21.
  - The 2015 Public Financial Management Act stipulates that petroleum revenue shall be used for financing infrastructure and government development projects, and not for recurrent expenditures.

### Recommended policy framework and measures
- General principles:
  - Establish a sound and transparent policy framework that constrains discretion and promotes fiscal discipline while isolating the budget from price volatility.
  - Ensure mechanisms work within a general context of sound public financial management.
- Institutional mechanisms suggested:
  - Medium-term fiscal rules.
  - Resource funds.
  - Fiscal responsibility laws.
- Budget integration and accountability:
  - Key principle: resource revenue flows should be fully integrated into the budget to ensure integrity and protect the budget’s role in setting expenditure priorities and allocating public resources.
  - All spending from resource revenues should be subject to the same scrutiny and accountability, including parliamentary oversight, as any other public spending.
- Macrofiscal framework design:
  - Use a well-designed macro-fiscal framework based on a set of long-term fiscal policy principles.
  - Principles could emphasize using resource revenues for development while maintaining fiscal sustainability, protecting against volatility, and guiding the choice between consumption, investment, and saving of resource revenues.
- Preparatory steps before revenue arrival:
  - Ensure a robust medium-term budget framework is in place before any revenues arrive.
  - Strengthen budget implementation, execution, and reporting.
  - Develop a medium-term approach to budgeting with forward expenditure ceilings linked to medium-term fiscal policy objectives.

### Broader fiscal risk management and regional considerations
- Need for enhanced monitoring and management:
  - Enhanced monitoring and management of fiscal risks would bring considerable benefits to all EAC partner countries by reducing the scope for international spillovers in the event of a crisis.
- Gaps in current fiscal data and risks:
  - Significant fiscal risks are not sufficiently captured in the current headline central government deficit and debt data.
  - Notable sources of risk include macroeconomic shocks, financial performance of public enterprises, large-scale infrastructure projects, PPPs, and pension funds.
  - Need to improve the quality and timeliness of information on fiscal accounts for both central government and other public-sector entities, including more timely compilation and disclosure of public enterprises’ profit and loss accounts.
- Transparency and enforcement:
  - A critical first step is to report fiscal risks in a transparent manner in public documents that accompany the budget—for example, in a statement of fiscal risks.
  - Fiscal risks should be taken into consideration by the regional institutions tasked with monitoring and enforcing EAMU criteria.
  - It would be desirable to enshrine EAMU commitments in national legislation, including national constitutions, to support monitoring and enforcement.
- IMF support:
  - The IMF stands ready to continue support of partner countries and the EAC Secretariat through technical assistance, fiscal transparency evaluations of all partner countries, and policy dialogue with country authorities.

*Source: Box 3.2. Natural Resource Discoveries in the EAC Region (extracted from the provided IMF content).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/dp/2015/_afr1507.pdf_