Exiting From Fragility in sub-Saharan Africa: The Role of Fiscal Policies and Fiscal Institutions

By Corinne C Delechat, Ejona Fuli, Dafina Glaser, Gustavo Ramirez, Rui Xu

December 22, 2015

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Corinne C Delechat, Ejona Fuli, Dafina Glaser, Gustavo Ramirez, and Rui Xu. Exiting From Fragility in sub-Saharan Africa: The Role of Fiscal Policies and Fiscal Institutions, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the role of fiscal policies and institutions in building resilience in sub-Saharan African countries during 1990-2013, with specific emphasis on a group of twenty-six countries that were deemed fragile in the 1990s. As the drivers of fragility and resilience are closely intertwined, we use GMM estimation as well as a probabilistic framework to address endogeneity and reverse causality. We find that fiscal institutions and fiscal space, namely the capacity to raise tax revenue and contain current spending, as well as lower military spending and, to some extent, higher social expenditure, are significantly and fairly robustly associated with building resilience. Similar conclusions arise from a study of the progression of a group of seven out of the twenty-six sub- Saharan African countries that managed to build resilience after years of civil unrest and/or violent conflict. These findings suggest relatively high returns to focusing on building sound fiscal institutions in fragile states. The international community can help this process through policy advice, technical assistance, and training on tax administration and budget reforms.

Subject: Current spending, Defense spending, Expenditure, Fiscal policy, Fiscal space, Revenue administration

Keywords: Country, CPIA, CPIA score, Current spending, Defense spending, Fiscal institutions, Fiscal policy, Fiscal space, Fragility, Government, Public goods, Resilience, Resilient country, State action, State fragility, State legitimacy, Sub-Saharan Africa, Terms of trade, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/268
Stock No:

WPIEA2015268
ISBN:

9781513591315
ISSN:

1018-5941

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