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Hannes Mueller
,
Christopher Rauh
,
Benjamin R Seimon
, and
Raphael A Espinoza
Can macroeconomic policy effectively help prevent armed conflicts? This paper contends that two key criteria need to be satisfied: the long-term benefits of prevention policies must exceed the costs associated with uncertain forecasts, and the policies themselves must be directly able to contribute to conflict prevention. This paper proposes policy simulations, based on a novel method of Mueller et al (2024a) that integrates machine learning and dynamic optimization, to show that investing in prevention can generate huge long-run benefits. Returns to prevention policies in countries that have not suffered recently from violence range from $26 to $75 per $1 spent on prevention, and for countries with recent violence, the rate of return could be as high as $103 per $1 spent on prevention. Furthermore, an analysis of the available data and results in the literature suggest that sound macroeconomic policies and international support for these policies can play key roles in conflict prevention. Based on these findings, this paper proposes actionable recommendations, for both global and domestic policymakers as well as international financial institutions and multilateral organizations, to promote peace and stability through macroeconomic policy.
International Monetary Fund. African Dept.
This Selected Issues paper reviews the impact of Chad’s procyclical fiscal policies on fiscal sustainability and macroeconomic outcomes and proposes a fiscal framework to anchor fiscal policy over the medium term. This framework combines a debt target aimed at ensuring that Chad’s risk of debt distress remains moderate and a financial asset floor to maximize its economic stabilization and shock insurance properties, while maintaining feasibility and flexibility to mobilize critical development spending. The proposed anchor could be monitored through a net debt target set at 28 percent of gross domestic product (GDP), to ensure that debt does not exceed a maximum threshold set at 42 percent of GDP even in the face of significant shocks, while the floor on liquid financial assets could be set at 5 percent of GDP. IMF propose a gradual convergence path—which balances prudence and mobilizing critical development spending—aimed at ensuring net debt remains at the target by 2029. The successful implementation of this framework will require accelerated progress on structural reforms and commitment from the Chadian authorities at the highest level.