## West African Economic and Monetary Union: Selected Issues

_IMF Staff Country Reports, March 7, 2023_

## Source details

**Canonical URL:** [West African Economic and Monetary Union: Selected Issues](https://www.imf.org/en/publications/cr/issues/2023/03/07/west-african-economic-and-monetary-union-selected-issues-530695)

## Other formats

- [Markdown version](/en/publications/cr/issues/2023/03/07/west-african-economic-and-monetary-union-selected-issues-530695/index.md)
- [Structured JSON version](/en/publications/cr/issues/2023/03/07/west-african-economic-and-monetary-union-selected-issues-530695/index.json)
- [Bundle manifest](/en/publications/cr/issues/2023/03/07/west-african-economic-and-monetary-union-selected-issues-530695/bundle-manifest.json)

## Bibliographic details
- Published: March 7, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400235986.002

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### Fiscal framework reform and supporting arrangements
- The paper recommends revamping the West African Economic and Monetary Union’s fiscal framework.
- Proposed supporting arrangements include:
  - an escape clause,
  - broader mechanisms for assessment, accountability, enforcement, and discipline,
  - possibly additional operational frameworks based on intermediate and complementary targets.
- The fiscal strategy should crucially encompass efforts towards increasing domestic revenues.

### Debt dynamics and drivers
- The countries’ debt dynamics are affected not only by the fiscal deficit but also by stock flow adjustments (SFA).
- The level of debt in any given year is a function of:
  - the previous year’s debt,
  - fiscal deficit,
  - a nominal growth effect,
  - an exchange rate effect,
  - a guarantees effect,
  - and a residual.
- Bringing stock flow adjustments (SFA) under control is essential to ensure debt stabilization over the medium term.

### Simulations, scenarios, and policy implications
- Simulations show that:
  - The only option to stabilize debt and recover buffers is to stick to the 3 percent fiscal deficit target while addressing the SFA.
  - The only scenario consistent with both debt stability and the recovery of some fiscal buffers to cope with future shocks is the baseline scenario, with a deficit target of 3 percent of gross domestic product and elimination of the SFA.
- Policy implication: combine strict adherence to the 3 percent deficit target with measures to eliminate or control SFAs, and pursue domestic revenue mobilization.

### Subjects and keywords (as listed)
- Subject: External debt, Fiscal policy, Fiscal rules, Government debt management, Inflation, International organization, Monetary policy, Prices, Public debt, Public financial management (PFM)
- Keywords: auction market debt, deficit target, Fiscal rules, Global, Government debt management, Inflation, inflation contagion, inflation DYNAMICS, market borrowing costs, WAEMU inflation

*IMF Staff Country Reports — West African Economic and Monetary Union: Selected Issues (March 7, 2023).*

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## Content in this bundle

- **1. Debt Dynamics**
  - [1. Debt Dynamics (Markdown version)](/-/media/files/publications/cr/2023/english/1wauea2023002.pdf.md){rel="alternate" type="text/markdown"}
  - [1. Debt Dynamics (PDF)](/-/media/files/publications/cr/2023/english/1wauea2023002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2023/03/07/west-african-economic-and-monetary-union-selected-issues-530695_