Countercyclical policy for Africa: institutional and economic feasibility

In August 2009, the Freetown Declaration by the African finance ministers committed their governments to 'implement fiscal stimulus measures' to counter the effects of the international financial crisis. This paper analyses the institutional and economic feasibility of realising this commitment. It considers the availability of policy instruments and the institutions to support them for countercyclical intervention in the sub-Saharan countries. The paper proposes a fiscal stimulus consistent with those institutions and constrains. In very few countries do there exist the institutions for the implementation of monetary policy. About one third of the countries are members of regional common currency institutions that eliminate the exchange rate and national monetary policy as policy tools. Within these constraints, for a majority of the countries, the fiscal expansion could be financed domestically, while other countries governments would require external funding. For about a fifth of the countries would a stimulus not be appropriate.