Fiscal Sustainability in Burundi : Baseline Projections, Stochastic Simulations, and Policy Scenarios

Kida, Mizuho

Fiscal Sustainability in Burundi : Baseline Projections, Stochastic Simulations, and Policy Scenarios

Autores

Kida, Mizuho

Editor

World Bank, Washington, DC

Descripción

This paper analyzes Burundi's medium-term fiscal sustainability in the light of the country's vulnerability to various shocks. Earlier studies have highlighted the country's vulnerability to exogenous shocks related to commodity exports, rain-fed agriculture, and volatile foreign aid. Internally, uncertainty about the implementation of the government's fiscal reforms is a key risk. The earlier studies, however, did not quantify the size and impact of the risks on the country's fiscal sustainability. Drawing initially on the standard inter-temporal sustainability framework, the baseline analysis shows that Burundi's ongoing fiscal policy strategy is not sustainable, even with a gradually improving external environment and relatively strong growth. Stochastic simulations show that adverse shocks to rainfall or coffee prices could increase the country's debt-to-gross domestic product ratio by 5 to 7 percentage points above the projected baseline ratio. Aid shocks could have an even larger impact but the estimates are less statistically reliable because of the short time series and because historical volatility in part reflects endogenous shocks (such as reform implementation) as well as exogenous shocks (donors' behavior). The policy scenario analysis shows that future fiscal sustainability will hinge on the government's ability to stick to its plans to broaden the tax base, streamline generous tax incentives and exemptions, and control civil service wages and short-run expenditure pressures -- risks that need to be monitored closely over the political cycle in the country.

Palabras clave

ADVANCED ECONOMIES, ADVERSE CONSEQUENCE, AGRICULTURAL OUTPUT, AGRICULTURAL SECTOR, AGRICULTURE, AMORTIZATION, ANNUAL AVERAGE RATE, ANNUAL PRECIPITATION, ANNUAL REVENUE, BANK ACCOUNTS, BANK DEBT, BANK POLICY, BASELINE PROJECTIONS, BASELINE SCENARIO, BUDGET SUPPORT, CAPITAL ASSETS, CAPITAL EXPENDITURE, CAPITAL EXPENDITURES, CENTRAL GOVERNMENT, CENTRAL GOVERNMENT REVENUE, CIVIL SERVANTS, CIVIL SERVICE, CIVIL SERVICE PAY, COLLUSION, COMMODITY PRICES, CORRUPTION, CREDIT FACILITY, CREDITORS, DEBT, DEBT POLICY, DEBT SERVICE, DEBT SERVICE PAYMENTS, DEBT SUSTAINABILITY, DEFICIT FINANCING, DEFICITS, DEVELOPMENT BANK, DEVELOPMENT POLICY, DISBURSEMENT, DISBURSEMENTS, DOMESTIC BANKS, DOMESTIC BORROWING, DOMESTIC DEBT, DOMESTIC FIRMS, DOMESTIC REVENUE, DONOR SUPPORT, ECONOMIC ACTIVITIES, ECONOMIC GROWTH, ECONOMIC OUTLOOK, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC REFORMS, ECONOMIC SITUATION, EFFICIENCY GAINS, ELASTICITY, EMERGENCY FINANCING, EMERGING MARKET, EMERGING MARKET COUNTRIES, ENDOGENOUS VARIABLES, ENROLLMENT, EX POST ASSESSMENT, EXCHANGE RATE, EXCHANGE RATES, EXISTING DEBT, EXOGENOUS SHOCKS, EXOGENOUS VARIABLES, EXPENDITURE, EXPENDITURE CUTS, EXPENDITURE POLICY, EXPENDITURES, EXPORT EARNINGS, EXPORTS, EXTERNAL BORROWING, EXTERNAL DEBT, EXTERNAL GRANTS, EXTERNAL SHOCKS, FARMERS, FIDUCIARY CONCERNS, FINANCIAL ACCOUNTABILITY, FINANCIAL ASSETS, FINANCIAL CRISIS, FINANCIAL MANAGEMENT, FINANCIAL OBLIGATIONS, FINANCING NEEDS, FISCAL ADJUSTMENT, FISCAL BALANCE, FISCAL COSTS, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL FRAMEWORK, FISCAL IMPACT, FISCAL IMPLICATIONS, FISCAL MANAGEMENT, FISCAL OUTCOMES, FISCAL POLICY, FISCAL POSITION, FISCAL PROJECTIONS, FISCAL REFORM, FISCAL REFORMS, FISCAL RISK, FISCAL RISKS, FISCAL STRATEGIES, FISCAL STRATEGY, FISCAL SURPLUS, FISCAL SUSTAINABILITY, FISCAL VULNERABILITIES, FISCAL VULNERABILITY, FIXED CAPITAL, FOREIGN EXCHANGE, FOREIGN RESERVES, GLOBAL MARKET, GOVERNANCE ISSUES, GOVERNMENT DEBT, GOVERNMENT REVENUE, GOVERNMENT REVENUES, GOVERNMENT SPENDING, GREATER ACCESS, GROSS DOMESTIC PRODUCT, GROWTH RATE, HEALTH CARE, INCOME, INCOME TAX, INEQUALITIES, INEQUALITY, INFLATION, INFLATION RATE, INFLATIONARY EXPECTATIONS, INFLATIONARY PRESSURE, INTEREST COSTS, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL FINANCE, INVESTING, INVESTMENT CLIMATE, LACK OF ACCESS, LOCAL CURRENCY, MACROECONOMIC FORECASTS, MACROECONOMIC IMPACT, MACROECONOMIC INSTABILITY, MACROECONOMIC POLICIES, MACROECONOMIC PROJECTIONS, MARKET PRICE, MARKET PRICES, MONETARY FUND, MULTIPLIER EFFECT, NEGATIVE SHOCK, OIL PRICE, POLICY RESPONSE, POLICY RESPONSES, POVERTY REDUCTION, PRESENT VALUE, PRICE INCREASES, PRIVATE SECTOR, PROPERTY RIGHTS, PUBLIC, PUBLIC ASSETS, PUBLIC DEBT, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE MANAGEMENT, PUBLIC EXPENDITURE REVIEW, PUBLIC FINANCES, PUBLIC FINANCIAL MANAGEMENT, PUBLIC GOODS, PUBLIC REVENUE, PUBLIC SECTOR, PUBLIC SECTOR PERFORMANCE, PUBLIC SERVICE, RAPID POPULATION GROWTH, REAL GDP, REAL GROWTH, REFORM AGENDA, REFORM BILL, RESERVES, RETURN, REVENUE COLLECTION, REVENUE GROWTH, REVENUE INCREASES, REVENUE REFORM, RISK OF DEBT, SAVINGS, SCHOOL FEES, SOCIAL SECURITY, SOURCE OF INCOME, STATE ASSETS, STATUTORY PAYMENTS, STRUCTURAL REFORMS, SUSTAINABILITY ANALYSIS, TAX, TAX BASE, TAX CODE, TAX COLLECTION, TAX EXEMPTION, TAX EXEMPTIONS, TAX INCENTIVES, TAX REFORM, TAX REVENUE, TAX REVENUES, TAX SUBSIDIES, TOTAL DEBT, TOTAL EXPENDITURE, TOTAL REVENUE, TRANSPARENCY, TREASURY, UNCERTAINTY, UNION, VALUE ADDED, VILLAGE, WAGES, stochastic simulation, fainfall