IMF Working Papers

Exiting From Fragility in sub-Saharan Africa : The Role of Fiscal Policies and Fiscal Institutions

Author/Editor:

Corinne Deléchat ; Ejona Fuli ; Dafina Glaser ; Gustavo Ramirez ; Rui Xu

Publication Date:

December 22, 2015

Electronic Access:

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Summary:

This paper studies the role of fiscal policies and institutions in building resilience in sub-Saharan African countries during 1990-2013, with specific emphasis on a group of twenty-six countries that were deemed fragile in the 1990s. As the drivers of fragility and resilience are closely intertwined, we use GMM estimation as well as a probabilistic framework to address endogeneity and reverse causality. We find that fiscal institutions and fiscal space, namely the capacity to raise tax revenue and contain current spending, as well as lower military spending and, to some extent, higher social expenditure, are significantly and fairly robustly associated with building resilience. Similar conclusions arise from a study of the progression of a group of seven out of the twenty-six sub- Saharan African countries that managed to build resilience after years of civil unrest and/or violent conflict. These findings suggest relatively high returns to focusing on building sound fiscal institutions in fragile states. The international community can help this process through policy advice, technical assistance, and training on tax administration and budget reforms.

Series:

Working Paper No. 15/268

Subject:

Africa Angola Benin Botswana Burkina Faso Burundi Cameroon Central African Republic Chad Comoros Congo, Democratic Republic of the Congo, Republic of Djibouti Equatorial Guinea Eritrea Ethiopia Fiscal policy Gabon Gambia, The Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Middle East Mozambique Namibia Niger Nigeria Rwanda Senegal Seychelles Sierra Leone South Africa Sub-Saharan Africa Sudan Swaziland Tanzania Togo Uganda Zambia Zimbabwe