Navigating Fiscal Challenges in Sub-Saharan Africa: Resilient Strategies and Credible Anchors in Turbulent Waters
Departmental Papers, September 26, 2023
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Bibliographic details
- Authors: Fabio Comelli, Peter Kovacs, Jimena Jesus Montoya Villavicencio, Arthur Sode, Antonio David, Luc Eyraud
- Published: September 26, 2023
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9798400230349.087
Executive summary and context
- Sub-Saharan African countries have been hit, in recent years, by a cascading series of shocks that have exacerbated fiscal vulnerabilities.
- Significant reforms are needed to rebuild buffers and preserve the sustainability of public finances.
- The paper argues that a strategic approach to fiscal policy is needed, as policies in the region typically lack an effective anchor and are excessively focused on short-term goals.
- An explicit debt target is a crucial element of the fiscal strategy; calibrating this anchor is a difficult exercise in the low-income country context.
Methodological contribution
- Proposes a novel method tailored to the low-income country context that relies on the principle of the preservation of debt-servicing capacity.
- Results using this method point to a median debt anchor of 55 percent of GDP in the region.
Main findings — debt, consolidation needs, and heterogeneity
- Median debt anchor: 55 percent of GDP.
- Most (though not all) countries will need to consolidate over the medium term to achieve prudent debt targets.
- Adjustment needs for the median country: in the order of 2 to 3 percent of GDP over the next five years.
- Consolidation feasibility: The required consolidation seems feasible given historical experience.
- Heterogeneity across countries:
- About a quarter of sub-Saharan African economies still have some fiscal space and can use it to continue making vital investments in human and physical capital.
Policy implications and recommended priorities
- Domestic revenue mobilization should play a central role in the adjustment process.
- Critical institutional reforms tailored to developing countries’ needs and constraints are necessary, including reforms in:
- Medium-term budgeting
- Fiscal risk management
- Expenditure controls
- Revenue administration
Publication and metadata
- Authors: Fabio Comelli, Peter Kovacs, Jimena Jesus Montoya Villavicencio, Arthur Sode, Antonio David, Luc Eyraud
- Publication date: September 26, 2023
- Series: Departmental Paper No 2023/007
- Pages: 74
- DOI: https://doi.org/10.5089/9798400230349.087
- ISBN: 9798400230349
- ISSN: 2616-5333
- Subjects: Expenditure; Fiscal consolidation; Fiscal policy; Fiscal stance; International organization; Political economy; Public debt
- Keywords: Africa; Covid-19; debt Tolerance fundamentals; factors impacting debt Tolerance; Fiscal Anchors; Fiscal consolidation; fiscal policy-Sub-Saharan Africa; Fiscal stance; Fiscal Strategy; fundamentals in Sub-Saharan Africa; Global; government debt burden in Sub-Saharan Africa; Political Economy; risk status; Sub-Saharan Africa
Departmental Paper No 2023/007 — Navigating Fiscal Challenges in Sub-Saharan Africa: Resilient Strategies and Credible Anchors in Turbulent Waters (September 26, 2023).
Content in this bundle
- Navigating Fiscal Challenges in Sub‑Saharan Africa