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Submitted by Jann Lay on
People start talking about fiscal expansion in Sub-Saharan Africa. Aren’t the economies of Uganda and Mauritius (Niger maybe somewhat less) already working at the maximum of their absorptive capacity in terms of public consumption and investment? Do you think governments would be able to handle a fiscal stimulus? If yes: How would they handle it? Only some routes (and my opinion): - Tax cuts? (Would erode the thin tax base beyond the crisis.) - Raise public sector pay? (Highly regressive transfer.) - Transfer programs, maybe targeted toward poorer groups? (Only possible if administrative capacity in place.) In advanced economies, a common argument against fiscal expansion is that it becomes effective much too late and therefore is a pure waste of resources. Yet, if expansionary policies are considered a possible instrument against the impact of the crisis in SSA: How would governments make sure that this time-lag does not occur? And which would be adequate fiscal instruments? Is there any room of manoeuvre for central banks in SSA? And if there is: Would you expect monetary policies to mitigate some of the global shock in real terms?