IMF Working Papers

This paper estimates the macroeconomic effects of fiscal consolidations in sub-Saharan Africa
using a newly constructed narrative dataset of discretionary fiscal policy actions for 14 countries over 1990–2024. The dataset, documented in Abdel-Latif et. al. (2025), identifies fiscal measures undertaken for reasons unrelated to current or prospective economic conditions, providing a credible basis for estimating fiscal multipliers. The results show that a fiscal consolidation of 1 percent of GDP reduces output by about 0.54 percent after two years, a larger effect than what is found using alternative identification methods. Fiscal consolidations also reduce imports, improve the current account balance, and lead to a depreciation of the real effective exchange rate. Our findings suggest that the composition of adjustment matters: spending cuts have larger multipliers than tax increases. Moreover, fiscal consolidations produce larger output losses when implemented during downturns and when development aid inflows are low. These findings are robust to several checks, including alternative estimation strategies. Overall, the findings highlight the critical role of timing and composition in designing effective fiscal adjustment strategies across sub-Saharan Africa.