Pandemic, Debt Accumulation, and a Balance Sheet Approach to Fiscal Analysis in African Countries

Governments have implemented an array of interventions needed to contain the economic impacts of COVID-19. Some of these interventions are not adequately captured in traditional fiscal metrics, such as debt and deficit. One approach to ensuring comprehensive coverage of these interventions and to prevent the build-up of fiscal risks is the adoption of a public sector balance sheet framework. The framework entails substituting debt as the main indicator of the financial position of the government with “net worth.” While there are significant challenges in compiling reliable balance sheets in African countries, the benefits of basic balance sheet analysis are within reach. Moving the agenda forward to ensure broad-based adoption of this comprehensive framework would entail enhanced collaboration between the IMF and the World Bank in nailing down the key challenges that could impede the adoption of such a framework; provision by these two institutions of tailored-made technical assistance and capacity development; facilitation of cross-country sharing of experiences; on-going collaboration with African regional organizations such as the AfDB; and securing the buy-in of country authorities, particularly through the involvement of civil society organizations and other fiscal watchdogs.

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