Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework
Selected Issues Papers, April 26, 2023
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- Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework
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Bibliographic details
- Authors: Can Sever, Athene Laws
- Published: April 26, 2023
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798400240423.018
Summary findings
- The paper provides a broad perspective on the WAEMU fiscal framework based on backward looking exercises and forward looking scenarios.
- Key findings:
- Repeated fiscal slippages and historically large stock flow adjustments contributed to the surge in the WAEMU public debt.
- Stock flow adjustments can have significant effects on the WAEMU debt dynamics going forward.
Scenarios and analytical focus
- Backward looking exercises: identify historical drivers of public debt increases, including fiscal slippages and large stock flow adjustments.
- Forward looking scenarios: assess how stock flow adjustments could affect debt dynamics in the future.
Policy recommendations and design priorities
- 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).
- Introducing an escape clause (which would enhance fiscal discipline and predictability).
- Capturing the extensive extra-budgetary and below-the-line operations.
- 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 areas and keywords
- 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
Content in this bundle
- Sipea2023028