Policy priorities under the program reflect the authorities’ commitment to revenue-based fiscal consolidation to support convergence of the fiscal deficit, which stood at 6.8 percent of GDP at end 2022, to the West African Economic and Monetary Union (WAEMU) deficit target of 3 percent of GDP by 2025.
This will be underpinned by improvements in domestic revenue mobilization, mainly relying on building a simpler, more broad-based and equitable tax system and further improvements in tax administration with a front-loaded increase in tax revenue of 1.1 percent of GDP during the first year of the program, and 0.5 percent of GDP increases in tax revenue between 2024 and 2026. The re-instatement of the petroleum pricing mechanism in early 2023 is expected to help recover VAT tax revenues on petroleum products of about 0.7 percentage points of GDP lost in 2022.
A set of public financial management reforms will continue to boost dividends from the tax administration reforms that have been carried out in recent years.
To aid the authorities in their commitments to boost domestic revenue mobilization, the Fund will be providing Technical Assistance to help develop a medium-term revenue mobilization strategy, which is expected to be adopted by cabinet and published by May 2024.
Critical social spending in education and health will also be protected under the program. In addition, wasteful blanket subsidies (notably indirect tax subsidies on fuel products), will over time be replaced with better targeted social assistance in the form of cash transfers to the most vulnerable.
The authorities reform agenda under the Fund-supported program also reflects a strong commitment to improving the business climate, inducing higher levels of private sector investment and financial inclusion, along with generating the necessary conditions for inclusive growth. To this end, structural reforms under the program will help strengthen governance; boost human capital development, especially among youth and women; and strengthen resilience to climate change.
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How will the program protect the most vulnerable? Will the program result in cuts in social programs?
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