A Balance-Sheet Model of Fiscal Policy in Namibia

Federico Sturzenegger and Nicolás Der Meguerditchian
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Federico Sturzenegger: Universidad de San Andrés/Harvard Kennedy School
Nicolás Der Meguerditchian: Universidad de San Andrés

No 136, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: The issue of debt sustainability has been the focus of continued theoretical and practical interest over the years. In emerging markets, much of the debate has focused on explicit government liabilities, which, while relevant, only represents a small share of government´s liabilities. In contrast the balance-sheet approach estimates all government assets (the most important being the net present value of taxes) and liabilities (the most important being the net present value of expenditures) to compute the government´s net worth. In this paper we apply this methodology to study fiscal sustainability in Namibia. We find that, currently, the Namibian government´s net worth is tilted sharply to the left. We simulate the impact of two types of shocks, a depreciation of the real exchange rate and an additional GDP growth, and find that both produce a further deterioration of the government's balance sheet. Finally, we ask about what type of policies would allow the government to recover the fiscal sustainability and show that, for example, a partial freeze in public salaries allows to recover fiscal sustainability very quickly.

Pages: 35 pages
Date: 2022-04
New Economics Papers: this item is included in nep-acc and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:136

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