Poverty Reduction Strategy Paper (PRSP) countries in Sub-Saharan Africa have shown
strong signs of growth resilience in the aftermath of the recent global crisis. Yet, this
paper finds evidence that growth has more than proportionately benefited the top quintile
during PRSP implementation. It finds that PRSP implementation has neither reduced
poverty headcount nor raised the income share of the poorest quintile in Sub-Saharan
Africa. While countries in other regions have been more successful in reducing poverty
and increasing the income share of the poor, there is no conclusive evidence that PRSP
implementation has played a role in shaping these outcomes.
This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs to rely on self-financing, so that when business opportunities open up entrepreneurs increase saving to finance the investment that produces growth. The key insight is that saving has to rise more than investment to allow also for the accumulation of precautionary assets. Plausibly calibrated simulations show that this net saving increase can sustain large and persistent net capital outflows.
This paper develops new error assessment methods to evaluate the performance of debt sustainability analyses (DSAs) for low-income countries (LICs) from 2005-2015. We find some evidence of a bias towards optimism for public and external debt projections, which was most appreciable for LICs with the highest incomes, prospects for market access, and at ‘moderate’ risk of debt distress. This was often driven by overly-ambitious fiscal and/or growth forecasts, and projected ‘residuals’. When we control for unanticipated shocks, we find that biases remain evident, driven in part by optimism regarding government fiscal reaction functions and expected growth dividends from investment.
An analysis of data for 39 sub-Saharan African countries during 1985–96 indicates that the variations in tax revenue-GDP ratios within this group are influenced by economic policies and the level of corruption. Namely, these ratios rise with declining inflation, implementation of structural reforms, rising human capital (a proxy for the provision of public services by the government), and declining corruption. The paper confirms that the tax revenue ratio rises with income, and that elements of a country’s tax base (such as the share of agriculture in GDP and the degree of openness) influence tax revenue.
We review the current state of the West African Economic and Monetary Union’s tax coordination framework, against the main objectives of the WAEMU Treaty of 1994: reduce distortions to intra-community trade, and mobilize domestic tax revenue. The process of tax coordination in WAEMU is one of the most advanced in the world—de jure at least—, but remains in many areas ineffective de facto. Nevertheless, the framework has, to some extent, succeeded in converging tax systems, particularly statutory tax rates, and may have contributed to improving revenue mobilisation. Important lessons can be drawn from the WAEMU experience, particularly in terms of whether coordination should take the form of harmonization through a top-down approach, or a softer approach of sharing best practice and limiting certain types of tax competition.