Experience with Budgetary Convergence in the WAEMU

IMF Working Papers, June 1, 2002

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Experience with Budgetary Convergence in the WAEMU

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Bibliographic details

• Authors: Paul R Masson, Ousmane Dore
• Published: June 1, 2002
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451853117.001

Summary

• Paper reviews fiscal adjustment experience in the West African Economic and Monetary Union (WAEMU) countries since the entry into force of the 1994 treaty establishing the framework for a regional convergence of national fiscal policies.
• Proposes a measure of the structural deficit that corrects for movements of both the business cycle and terms of trade.
• Notes that although fiscal deficits worsened in 1998-2001 in some countries because of terms of trade deterioration and unfavorable movements in the business cycle, convergence stalled even when corrected for these factors.
• Concludes that meeting fiscal deficit targets in the future will be facilitated by a favorable external environment but will, in any case, require a higher revenue ratio and downward pressure on government wages as shares of GDP.

Methodology: Structural deficit measure

• Proposes a measure of the structural deficit that corrects for movements of both the business cycle and terms of trade.
• Emphasis on adjusting fiscal deficit measures to account for:
  • business cycle movements
  • terms of trade fluctuations and shocks

Findings on convergence and fiscal adjustment

• Fiscal deficit worsened in 1998-2001 in some WAEMU countries, partly attributable to:
  • terms of trade deterioration
  • unfavorable movements in the business cycle
• Even after correcting deficits for business cycle and terms of trade movements, fiscal convergence stalled.

Policy implications and recommendations

• Future success in meeting fiscal deficit targets will be aided by a favorable external environment.
• Regardless of external conditions, meeting deficit targets requires:
  • a higher revenue ratio
  • downward pressure on government wages as shares of GDP

Content in this bundle

• Experience with Budgetary Convergence in the WAEMU - WP/02/108
  • Experience with Budgetary Convergence in the WAEMU - WP/02/108 (Markdown version)
  • Experience with Budgetary Convergence in the WAEMU - WP/02/108 (PDF)