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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.
Olivier Basdevant

liberalization, the baseline estimate of the fall in SACU transfers ranges from 5 percent of GDP to 15 percent for BLNS countries ( Table 1 ). This range of losses is used to derive the adjustment strategy, which is further discussed in this section. Although the specific magnitude of each country loss is yet unknown, the results are nevertheless qualitatively robust to this magnitude. Thus, the policy recommendations would remain broadly the same, even if the size of the needed fiscal adjustment were to be smaller. 6 Table 1. SACU Transfers in BLNS and Simulated Loss

Olivier Basdevant
Following the onset of the global economic crisis in 2008, SACU member countries have witnessed a significant growth slowdown, and a deterioration of their fiscal balances. This paper (i) assesses options for the design of the needed fiscal consolidation, and (ii) discussed medium-term fiscal policy rules that would help maintain a sound fiscal stance once consolidation has taken place. The main messages are: (i) 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, (ii) fiscal rules could be of particular interest for SACU members notably, a new customs revenue-sharing formula, procedural rules to strengthen budget process, and numerical rules at the national level.
Luis-Felipe Zanna, Olivier Basdevant, Ms. Susan S. Yang, Ms. Genevieve Verdier, Mr. Joannes Mongardini, and Dalmacio Benicio

) the creation of the Southern African Development Community (SADC) customs union. Quantifying with precision these risks is a daunting task, but under the preliminary parameters under discussion on the revenue sharing formula, and the impact on trade liberalization, the baseline estimate of the fall in SACU transfers ranges, for BLNS, from 5 percent of GDP to 15 percent ( Table 1 ). From these parameters it is possible to define options for a fiscal adjustment, which is the purpose of this paper. Although the specific magnitude of each shock is yet unknown, the