Cover

Contents

Acknowledgments

Overview

Introduction

1. Policy Challenges and Constraints

Policy Challenges Associated with SACU Revenues

Policy and Institutional Constraints

2. Addressing Fiscal Policy Volatility in Lesotho and Swaziland

Can Fiscal Rules Help?

Managing SACU Revenue in a “Constrained” Economy

Welfare-Enhancing Role of Fiscal Rules

3. From Discretionary to a Rules-Based Fiscal Policy Framework

Groundwork for Successful Fiscal Rules

Steps Toward a Rules-Based Policy

4. Conclusion

Boxes

1. Volatility, Government Expenditure, and Long-Term Growth

2. Lesotho and Swaziland: Groundwork for Successful Fiscal Rules

Appendices

I. SACU and SACU Revenues

II. Fiscal Rules: International Experience

III. Baseline Calibration: Parameter Setting

IV. Baseline Calibration: Policy Parameters

References

Figures

1a. Composition of Fiscal Revenues

1b. Fiscal Balances and Expenditures

2. SACU Revenues for Lesotho and Swaziland and South Africa’s GDP Growth

3. SACU Revenues for Botswana, Lesotho, Namibia, and Swaziland: Forecasts and Outturns

4. Financing Sources for Government Deficit

5a. Policy Experiment: Impulse Responses to SACU Revenue Shocks (Lesotho)

5b. Policy Experiment: Impulse Responses to SACU Revenue Shocks (Swaziland)

6. Consumption Compensation

7. Consumption Compensation by Type of Household

A1. Retroactive Adjustments for SACU Revenues of Botswana, Lesotho, Namibia, and Swaziland

A2. Fiscal Rules and Exchange Rate Regimens

Tables

1. Average Size of the SACU Revenue

A1. Countries with Fiscal Rules and Managed Exchange Rate Regimes