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Mr. Antonio David, Alexandre Nguyen-Duong, and Hoda Selim

Fiscal Rules Design Fiscal Rules Enforcement Public Financial Management Reforms Fiscal Risk Sharing and Coordination Mechanisms Conclusion References Appendix 1. Thinking about the Maximum Debt Limit for the WAEMU BOXES 1. Public Debt Dynamics and Stock-Flow Adjustments (SFA) over 2012–19 FIGURES 1. Regional Fiscal Indicators, 2012–2020 2. Fiscal Anchors and Safety Buffers 3. Fiscal Anchors and Safety Buffers: Calibration with Higher Interest Rates TABLES 1. WAEMU Convergence Criteria Adopted in 2015 2. Estimates of Output Elasticity of

Olivier Basdevant, Patrick A. Imam, Mr. Tidiane Kinda, and Ms. Aleksandra Zdzienicka
West African Economic and Monetary Union (WAEMU) countries face a well-known dilemma between the need to provide shock-smoothing mechanisms and the lack of adequate mechanisms to do so. WAEMU countries are subject to frequent and, to a large extent, asymmetric shocks. They have remained poorly diversified and vulnerable to external shocks, such as changing weather conditions. In addition to limited shock-smoothing mechanisms at the regional level, WAEMU members’ ability to respond to shocks through national policies is also constrained by limited fiscal space and the need to preserve external stability—not only at the national level but also at the union level. In this context, developing a well-defined fiscal rule framework at the national level would help to build the necessary fiscal space for shock-smoothing. In addition, the development of specific shock-smoothing mechanisms—including a more developed and integrated financial sector—would also be critical. In addition, promoting financial development is also a challenge, which needs to be addressed in tandem with an adequate surveillance system. Some of these challenges have been faced by other monetary unions, such as the euro area.
International Monetary Fund. African Dept.

investments, the continued implementation of the NDP’s projects and increased foreign direct investment. 8. The authorities acknowledge significant risks to the outlook, including rising trade protectionism, decelerating global growth, regional security threats and climate change. Against this background, they will endeavor to reinforce the economy’s resilience to shocks. They will pursue the implementation of policies aimed at increasing fiscal sustainability, including through consolidation efforts to meet the WAEMU convergence criteria; strengthening debt

International Monetary Fund. African Dept.

context, the Conference of Heads of States declared a temporary suspension of the WAEMU convergence criteria . In April 2020, the WAEMU’s Heads of States adopted a Declaration putting in abeyance the application of the Union’s Pact for Convergence, Stability, Growth and Solidarity among member-countries. This suspension applies to all convergence criteria, including the 3 percent of GDP deficit ceiling and the 70 percent of GDP ceiling on government debt. While noting that the suspension was temporary to address the needs related to the Covid crisis, the Declaration did