Revisiting fiscal policies in managing risk to build resilience

Dakar, 05th October 2023 – The African Institute for Economic Development and Planning
(IDEP) brought together experts from African Member States, IDEP Alumni, ECA Young
Economists Network members, Inter-governmental and International Organizations,
academia and Civil Society Organizations to discuss innovative fiscal policies to respond to
current and future shocks towards achieving the implementation of the Sustainable
Development Goals (SDGs).
As part of its mandate of capacity building and advisory services to Member States, and
drawing lessons from the impacts of recent external shocks on the continent’s economies,
IDEP is placing greater emphasis on integrating risk management and strengthening socioeconomic resilience in its programs on Macroeconomic and Sustainable Development
Planning.
Fiscal policies involve the use of government spending, taxation, and borrowing to influence
the economy. Fiscal interventions can have various rationales, such as macroeconomic
benefits, equity, or efficiency. Fiscal policies can also be used to promote health through
taxes and subsidies. Basically, fiscal policy plays a stabilizing role in the business cycle to
establish a healthier economy and can also be used as a tool to redistribute wealth in a
context of widening inequality gap in the country.
“IDEP mandate is to support its Member States in economic management and efficient
planning. In the current global scenario, efficient, agile, and innovative financing for
economic resilience and development is at the core of macroeconomic management”, said
Bakary Dosso, Head of Training and Research Division of IDEP, in his introductory remarks.

Mitigating the effects of the economic shocks
Fiscal policy tries to direct the economy in different ways, either expansionary or
contractionary. The International Monetary Fund (IMF) and other multilateral organizations
are at the forefront of calls for governments across the world to design appropriate fiscal
policy responses to issues of economic stabilization.
Expansionary fiscal and monetary policies have been adopted to mitigate the economic
shocks and to increase the prioritization of health expenditures: the interest rate cuts and
both tax/debt reliefs seem to come across debt vulnerabilities as a way of smart
management of debt and unexpected government expenditures in times of crisis.
“Countries should be able to carry out a trend analysis of their past fiscal realities and
forecast their future fiscal operations based on the existing realities. Realistic projections
help countries to reduce the likelihood of incurring unplanned fiscal deficits because of
shortfalls in revenue generation as against planned expenditure within the fiscal year”,
said, in his presentation, Uzochukwu Amakom, Economist, Professor and Researcher at the
Institute for Development Studies (IDS) at the University of Nigeria.
While economies were dealing with recovery for the health outbreak, the implications of
another negative scenario – i.e. Russia-Ukraine war- with the boost in energy prices and
more persistent supply-chain problems affected mainly countries depending on
importations of basic commodities. This shows that distinction should then be drawn
between crisis mitigation, crisis resolution and resilience building. Governments need to
plan for the longer-term for greater socio-economic resilience.
To help address fiscal issues in the current context, Lassana Cissokho, Economist, Professor
and Researcher, University Cheikh Anta Diop, proposed to consider two policy actions :
“Consolidating public finances and to strengthening public financial management amid
difficult funding conditions ; and containing inflation, and exchange rate depreciation”.
The African Union Commission recommended increased social protection programs,
especially towards the labour market, vis-a-vis the current economic threshold of each
government. This should be complemented through optimal fiscal, monetary, and financial
policies responses. There is a need for concise and well targeted measures to address the
respective issues of households, workers, and businesses in time of crises.
Online
Issued by:
African Institute for Economic Development and Planning
E-Learning – Knowledge & Management Division
Rue du 18 Juin (behind the National Assembly)
Dakar
Senegal
Tel.: (+221) 33 829 55 00 / 33 829 55 27
Website: www.uneca.org/idep