Surges in public debt in many countries since the COVID-19 pandemic have rekindled interest in fiscal consolidations, which often entail difficult policy choices in the face of economic and political constraints. This paper presents findings from a survey of the literature on fiscal consolidations, focusing on the pre-existing conditions, impact and design aspects of past consolidation episodes. These findings provide insight into factors that influence the chance of successful consolidations, their growth and distributional impact, the pace, phasing, duration and policy mix of reforms to mitigate the impact, and the role of fiscal institutions and capacity development in successful consolidations.

Public procurement can be highly vulnerable to corruption. This paper outlines a methodology and results in assessing corruption risks in public procurement and their impact on relative prices, using large databases on government contracts and tenders. Our primary contribution is to analyze how price differential in public procurement contracts can be explained by corruption risk factor (aggregated in a synthetic corruption risk index). While there are intrinsic limitations to our study (price differentials can come from structural reasons, such as a limited number of potential suppliers) it still provides a guiding tool to assess where corruption risks would have the biggest budgetary impact. Such analysis helps inform mitigating policies owing to the granular data used. JEL Classification Numbers: D73, H40, H57

Drawing on the Fund’s analytical and capacity development work, including Public Investment Management Assessments (PIMAs) carried out in more than 60 countries, the new book Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment will address how countries can attain quality infrastructure outcomes through better infrastructure governance—an issue becoming increasingly important in the context of the Great Lockdown and its economic consequences. It covers critical issues such as infrastructure investment and Sustainable Development Goals, controlling corruption, managing fiscal risks, integrating planning and budgeting, and identifying best practices in project appraisal and selection. It also covers emerging areas in infrastructure governance, such as maintaining and managing public infrastructure assets and building resilience against climate change.

The following symbols have been used throughout this publication: . . . to indicate that data are not available -to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist -between years or months (for example, 2008-09 or January-June) to indicate the years or months covered, including the beginning and ending years or months / between years (for example, 2008/09) to indicate a fiscal or financial year "Billion" means a thousand million; "trillion" means a thousand billion."Basis points" refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point)."n.a." means "not applicable."Minor discrepancies between sums of constituent figures and totals are due to rounding.As used in this publication, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice.As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

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.

Anecdotal evidence suggests that the economies of South Africa and its neighbours (Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe) are tightly integrated with each other. The multiple interconnections suggest that South Africa's GDP growth rate should affect positively its neighbours'. However, our review of the available econometric evidence and our panel growth regressions suggest that there is no strong evidence of real spillovers in the region after 1994, once global shocks are controlled for. More generally, we find no evidence of real spillovers from South Africa to the rest of the continent post-1994. We investigate the possible reasons for this lack of spillovers. Most importantly, the economies of South Africa and the rest of Sub-Saharan Africa might have decoupled in the mid-1990s. That is when international sanctions on South Africa ended and the country re-integrated with the global economy, while growth in the rest of the continent accelerated due to a combination of domestic and external factors.

Anecdotal evidence suggests that the economies of South Africa and its neighbors (Botswana, Lesotho, Mozambique, Namibia, Swaziland, and Zimbabwe) are tightly integrated with each other. There are important institutional linkages. Across the region there are also large flows of goods and capital, significant financial sector interconnections, as well as sizeable labor movements and associated remittance flows. These interconnections suggest that South Africa’s GDP growth rate should affect positively its neighbors’, a point we illustrate formally with the help of numerical simulations of the IMF’s GIMF model. However, our review and update of the available econometric evidence suggest that there is no strong evidence of real spillovers in the region after 1994, once global shocks are controlled for. More generally, we find no evidence of real spillovers from South Africa to the rest of the continent post-1994. We investigate the possible reasons for this lack of spillovers. Most importantly, the economies of South Africa and the rest of Sub-Saharan Africa might have de-coupled in the mid-1990s. That is when international sanctions on South Africa ended and the country re-integrated with the global economy, while growth in the rest of the continent accelerated due to a combination of domestic and external factors.

The Southern African Customs Union (SACU) is the oldest customs union in the world, with significant opportunities ahead for creating higher economic growth and increased welfare benefits to the people of the region, by fulfilling its vision to become an economic community with a common market and monetary union. This volume describes policy options to address the barriers to equitable and sustainable development in the region and outlines a plan for deeper regional integration.

This selected issues paper on Cape Verde, Namibia, and Kingdom of Swaziland was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member countries. It is based on the information available at the time it was completed on January 23, 2013. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the governments of Cape Verde, Namibia, and Kingdom of Swaziland or the Executive Board of the IMF.

The Southern African Customs Union (SACU) is the oldest customs union in the world, with significant opportunities ahead for creating higher economic growth and increased welfare benefits to the people of the region, by fulfilling its vision to become an economic community with a common market and monetary union. This volume describes policy options to address the barriers to equitable and sustainable development in the region and outlines a plan for deeper regional integration.

The Kingdom of Swaziland (hereinafter “Swaziland”) is a small, open economy bordering Mozambique and South Africa with a population of 1.1 million people. It is a landlocked country with an economy heavily dependent on concentrates, sugar exports, and tourism, and with more than 80 percent of its imports originating from South Africa. Swaziland is a member of the Southern African Customs Union (SACU) and has increasingly relied on SACU transfers in the last few years as a source of fiscal revenue and foreign exchange receipts. Its currency, the lilangeni, is pegged at parity with the South African rand under the Common Monetary Area. The rand is also legal tender in Swaziland. After two difficult fiscal years, Swaziland has regained fiscal space with a sharp increase in transfers from the Southern African Customs Union (SACU). The deficits accumulated during these two fiscal years (13.4 and 6.0 percent of GDP in 2011/12 and 2012/13, respectively) led to: (i) a significant drawdown of gross official reserves at the central bank, (ii) significant domestic borrowing, and (iii) an accumulation of domestic payment arrears, estimated at E 1.6 billion (5.4 percent of GDP) at end-March 2012. Arrears affected largely pension funds and government suppliers (each account for about 40 percent of the total stock of arrears). As a result, real GDP growth is projected to contract by 1.5 percent in 2012, mostly because of the accumulated arrears, a stagnant credit to the private sector, and weak confidence in Swaziland fiscal and external sustainability. With SACU transfers increasing from about 10 percent of GDP in 2011/12 to 22.5 percent in 2012/13, some fiscal space was regained. The windfall revenue has been used to repay an advance taken by the central bank and to reduce arrears by E 250 million as of end-September 2012. An additional E 720 million in arrears to the public pension fund have been restructured into a three-year loan. Higher SACU transfers have also improved external balances by reducing the current account deficit and increasing central bank reserves. Reserves are broadly adequate at E 6.0 billion (3.1 months of imports) at end-November 2012, a significant improvement from the E 3.7 billion recorded at end-March 2012.

The Kingdom of Swaziland (hereinafter “Swaziland”) is a small, open economy bordering Mozambique and South Africa with a population of 1.1 million people. It is a landlocked country with an economy heavily dependent on concentrates, sugar exports, and tourism, and with more than 80 percent of its imports originating from South Africa. Swaziland is a member of the Southern African Customs Union (SACU) and has increasingly relied on SACU transfers in the last few years as a source of fiscal revenue and foreign exchange receipts. Its currency, the lilangeni, is pegged at parity with the South African rand under the Common Monetary Area. The rand is also legal tender in Swaziland. After two difficult fiscal years, Swaziland has regained fiscal space with a sharp increase in transfers from the Southern African Customs Union (SACU). The deficits accumulated during these two fiscal years (13.4 and 6.0 percent of GDP in 2011/12 and 2012/13, respectively) led to: (i) a significant drawdown of gross official reserves at the central bank, (ii) significant domestic borrowing, and (iii) an accumulation of domestic payment arrears, estimated at E 1.6 billion (5.4 percent of GDP) at end-March 2012. Arrears affected largely pension funds and government suppliers (each account for about 40 percent of the total stock of arrears). As a result, real GDP growth is projected to contract by 1.5 percent in 2012, mostly because of the accumulated arrears, a stagnant credit to the private sector, and weak confidence in Swaziland fiscal and external sustainability. With SACU transfers increasing from about 10 percent of GDP in 2011/12 to 22.5 percent in 2012/13, some fiscal space was regained. The windfall revenue has been used to repay an advance taken by the central bank and to reduce arrears by E 250 million as of end-September 2012. An additional E 720 million in arrears to the public pension fund have been restructured into a three-year loan. Higher SACU transfers have also improved external balances by reducing the current account deficit and increasing central bank reserves. Reserves are broadly adequate at E 6.0 billion (3.1 months of imports) at end-November 2012, a significant improvement from the E 3.7 billion recorded at end-March 2012.

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.

This paper applies the work of Berg and Ostry (2011) to the SACU region, to identify how inequalities have played a role in growth in each of these countries, and elaborates policy options to mitigate the effects of inequalities and foster growth. Lower income inequalities could lead to significant gains, as SACU countries could almost double the duration of their growth periods, with much lower inequalities. While reducing inequalities may be desirable, the design of policies to achieve such objective is not trivial. Policies targeting income inequalities at the sources are expected to be the most effective to reduce inequalities and promote growth. However, direct redistribution, if carefully crafted can also be very effective in reducing inequalities while limiting its potentially negative impact on growth.

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.

Swaziland has faced a significant fiscal crisis since 2010, in the wake of loss of transfers from the Southern African Customs Union (SACU). The fiscal crisis has led to increasing vulnerabilities, not only of public finances but also on commercial banks and the private sector. This paper provides an analysis of Swaziland's main macroeconomic vulnerabilities and the main policy implications of the analysis.