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Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework
Author:
Can Sever https://isni.org/isni/0000000404811396 International Monetary Fund

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Athene Laws
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Series:
Selected Issues Papers
Volume/Issue:
Volume 2023: Issue 028
Language:
English
Publication Date:
26 Apr 2023
DOI:
https://doi.org/10.5089/9798400240423.018
ISBN:
9798400241833
ISSN:
2958-7875
Pages:
22
Keywords:
Fiscal policy; fiscal rules; fiscal governance; PFM; fiscal coordination; monetary unions; WAEMU; stock flow adjustments; flow adjustment; debt dynamics scenario; deficit target; scenario assumption; deficit measure; deficit combination; so called SFA; Government debt management; Debt sustainability analysis; Debt limits; Global
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IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed.
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This paper aims to provide a broad perspective on the WAEMU fiscal framework. Based on backward looking exercises and forward looking scenarios, it shows that (i) repeated fiscal slippages and historically large stock flow adjustments contributed to the surge in the WAEMU public debt, and (ii) stock flow adjustments can have significant effects on the WAEMU debt dynamics going forward. This paper also discusses that it is essential and urgent to reintroduce the fiscal rules and the Convergence Pact and to enhance the rules. Revamping the fiscal rules should focus on introducing a correction mechanism (which could contain surges in debt in the future) and an escape clause (which would enhance fiscal discipline and predictability), as well as capturing the extensive extra-budgetary and below-the-line operations and strengthening the enforcement mechanism. Any consideration to changing the fiscal deficit target should also encompass addressing extra-budgetary and below-the-line transactions (for example by changing the definition of the deficit). It is not appropriate to increase the debt ceiling.
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Cover Selected Issues Papers
Selected Issues Papers
Publisher:
International Monetary Fund