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Mr. Alfredo Cuevas

Botswana, Lesotho, Namibia, and Swaziland (BLNS) receive significant government revenues in transfers from the Southern African Customs Union (SACU). As a percentage of GDP and total revenues, these transfers were very large and rising during 2007–09. In Lesotho and Swaziland, SACU transfers exceeded a third and a quarter of GDP, respectively, in 2008/09 ( Figure 3.1 ). 1 The magnitude of these transfers makes public finances in BLNS highly dependent on their evolution. The very high volatility of SACU transfers significantly complicates BLNS’s public

International Monetary Fund. African Dept.

Addressing Fiscal Pressures 1 A. Introduction 1. The fiscal outlook remains challenging and absent upfront consolidation the external position will continue to deteriorate. SACU transfers shrunk by a third in FY21/22 and though they are projected to rebound in the short run, the outlook remains subdued and characterized by uncertainty. With the upward drift in spending over time, COVID-induced spending trade-offs are likely to persist if the pandemic lingers. In the absence of consolidation, the government would be forced to either (i) cut spending

Olivier Basdevant

Following the onset of the global economic crisis in 2008, Southern African Customs Union (SACU) member countries experienced a significant growth slowdown and deterioration of their fiscal balances. This deterioration came from two sources. First was a considerable reduction in SACU transfers, which account for a large share of total revenue for Botswana, Lesotho, Namibia, and Swaziland (BLNS), 1 owing, in part, to the global crisis, which reduced the SACU revenue pool, but also to the procyclicality of the revenue-sharing formula, which aggravated the

Luis-Felipe Zanna, Olivier Basdevant, Ms. Susan S. Yang, Ms. Genevieve Verdier, Mr. Joannes Mongardini, and Dalmacio Benicio
Botswana, Lesotho, Namibia, and Swaziland face the serious challenge of adjusting not only to lower Southern Africa Customs Union (SACU) transfers because of the global economic crisis, but also to a potential further decline over the medium term. This paper assesses options for the design of the needed fiscal consolidation. The choice among these options should be driven by (i) the impact on growth and (ii) the specificities of each country. Overall, a focus on government consumption cuts appears to minimize the negative impact on growth, and would be appropriate given the relatively large size of the public sector in each country.
International Monetary Fund. African Dept.

EVALUATING FISCAL RULES FOR LESOTHO A. Introduction B. Revenue and Spending in Lesotho C. Fiscal Rules—Types and Practice Experience D. The Institutional Framework for Fiscal Rules E. A Fiscal Rule Framework for Lesotho References BOX 1. Some Examples of Correction Mechanisms FIGURES 1. Spending in Lesotho 2. Revenue Developments 3. SACU Transfers, Capital Spending, and Wages 4. Fiscal Balance and SACU Transfers 5. Lesotho: Debt Components 6. Fiscal Rules on the Rise: 1990–2021 7. Average Number of Rules per Country 8. Common Adoption of

Mr. Thomson Fontaine, Dalmacio Benicio, Mr. Joannes Mongardini, Ms. Genevieve Verdier, and Mr. Gonzalo C Pastor Campos
The Southern African Customs Union (SACU) is facing its biggest challenge in its 100 years of existence. The global economic crisis has significantly reduced its revenue outlook, which is having a disproportionate impact on its smaller member countries, and which calls for an appropriate policy response. This paper discusses specifically the implications for Botswana, Lesotho, Namibia, and Swaziland, and provides recommendations regarding the proper fiscal response by these countries to the decline in SACU revenue.