The Impact of Fiscal Consolidations on Growth in Sub-Saharan Africa

By Francisco Arizala, Jesus R Gonzalez-Garcia, Charalambos G Tsangarides, Mustafa Yenice

December 14, 2017

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Francisco Arizala, Jesus R Gonzalez-Garcia, Charalambos G Tsangarides, and Mustafa Yenice. The Impact of Fiscal Consolidations on Growth in Sub-Saharan Africa, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines the output effects of changes in public expenditure and revenue in sub-Saharan African countries during 1990–2016. Fiscal multipliers in sub-Saharan Africa are somewhat smaller than those in advanced and emerging economies. The effect of changes in fiscal policy on output depends on the composition: cutting public investment has a larger effect on output than cutting public consumption or raising revenue. Episodes of fiscal consolidation have short- and medium-term output effects, but here, too, composition matters: fiscal consolidations based on reducing public investment have the largest effect on output, while fiscal consolidations based on revenue mobilization are less harmful than those based on public investment cuts. These findings suggest that the negative impact on growth can be mitigated through the design of fiscal adjustment and the accompanying policy environment.

Subject: Expenditure, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Public investment spending

Keywords: Economic activity, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/281
Stock No:

WPIEA2017281
ISBN:

9781484333112
ISSN:

1018-5941

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