West African Economic and Monetary Union: Selected Issues

This Selected Issues paper analyzes domestic revenue mobilization (DRM) in the West African Economic and Monetary Union (WAEMU). DRM is critical for financing economic and social development and ensuring debt sustainability in WAEMU, especially in light of rising interest, high security spending, and the prospective reduction in foreign aid. It is a cornerstone of the authorities’ reform programs and one of the most pressing policy challenges. Over the last two decades, DRM in WAEMU has improved overall, but it has shown a persistently large heterogeneity in revenue performance across countries. The secondary criterion of the suspended Convergence Pact, which sets a 20 percent floor on the tax to gross domestic product ratio, remains a high bar for most WAEMU countries, reflecting a generally narrow tax base, weak enforcement capacity, and high informality, among other factors. Going forward, a renewed commitment to streamline tax systems, rationalize exemptions, and improve compliance would durably support revenue mobilization. Regional surveillance mechanisms should ensure effective implementation and enforcement of regional DRM commitments, while enhancing regional cooperation on revenue administration, as well as supporting collaboration and knowledge transfer within the union.