Selected Issues Papers

Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework

By Can Sever, Athene Laws

April 26, 2023

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Format: Chicago

Can Sever, and Athene Laws. Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework, (USA: International Monetary Fund, 2023) accessed November 8, 2024

Summary

This paper aims to provide a broad perspective on the WAEMU fiscal framework. Based on backward looking exercises and forward looking scenarios, it shows that (i) repeated fiscal slippages and historically large stock flow adjustments contributed to the surge in the WAEMU public debt, and (ii) stock flow adjustments can have significant effects on the WAEMU debt dynamics going forward. This paper also discusses that it is essential and urgent to reintroduce the fiscal rules and the Convergence Pact and to enhance the rules. Revamping the fiscal rules should focus on introducing a correction mechanism (which could contain surges in debt in the future) and an escape clause (which would enhance fiscal discipline and predictability), as well as capturing the extensive extra-budgetary and below-the-line operations and strengthening the enforcement mechanism. Any consideration to changing the fiscal deficit target should also encompass addressing extra-budgetary and below-the-line transactions (for example by changing the definition of the deficit). It is not appropriate to increase the debt ceiling.

Subject: Asset and liability management, Debt limits, Debt sustainability analysis, External debt, Fiscal policy, Fiscal rules, Government debt management, International organization, Monetary policy, Public debt, Public financial management (PFM)

Keywords: Debt dynamics scenario, Debt limits, Debt sustainability analysis, Deficit combination, Deficit measure, Deficit target, Fiscal coordination, Fiscal governance, Fiscal policy, Fiscal rules, Flow adjustment, Global, Government debt management, Monetary unions, PFM, Scenario assumption, So called SFA, Stock flow adjustments, WAEMU

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Selected Issues Paper No. 2023/028

  • Stock No:

    SIPEA2023028

  • ISBN:

    9798400240423

  • ISSN:

    2958-7875

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