2024-05-16-IMF-Securing_Fiscal_Discipline_and_Credibility_in_WAEMU_17页_1mb

Securing Fiscal Discipline and Credibility in WAEMU

Fiscal Challenges: The West African Economic and Monetary Union (WAEMU) faces risks to debt sustainability, external viability, and financial stability due to fiscal deficits and stock-flow adjustments (SFAs). Public debt increased significantly during recent shocks, reaching about 61% of GDP in 2023, driven by deficits and SFAs averaging 1.5% of GDP over the past decade.

Key Recommendations:

1. Fiscal Consolidation: Achieve a 3% of GDP deficit target by 2025 through domestic revenue mobilization (DRM) and expenditure control, particularly managing the wage bill. Avoid increasing deficit ceilings (e.g., from 3-70% to 4-80% of GDP), as this would raise borrowing costs without creating meaningful fiscal space.
2. Debt Sustainability: Maintain the 70% of GDP debt ceiling to limit interest payments, as higher debt levels increase risk premiums and service costs.
3. Fiscal Rules: Revamp the fiscal rule with credible mechanisms: a debt correction procedure for exceeding ceilings, exogenous escape clauses for major shocks, and harmonized fiscal indicator definitions across the region.
4. Addressing SFAs: Reduce SFAs to halt further debt accumulation and strengthen fiscal buffers.
5. Communication & Enforcement: Enhance transparency, accountability, and enforcement, including leveraging the WAEMU Commission’s oversight.

Core Conclusion: Strengthening fiscal discipline via coordinated fiscal consolidation, robust frameworks, and credible policy adjustments is vital for safeguarding economic stability and sustainable development in WAEMU.