How to Adjust to a Large Fall in Commodity Prices

Paulo Medas, Veronique Salins and Jeff Danforth

No 2016/001, IMF Fiscal Affairs Department from International Monetary Fund

Abstract: Resource-rich countries have to manage highly volatile commodity revenues. In periods of revenue booms there is a tendency for large spending scale-ups. When facing large and persistent reductions in commodity prices, some of these countries will need to adjust their budgets to the new reality. In many cases, overall surpluses turn into large fiscal deficits and borrowing costs tend to rise with the fall in commodity prices. This note discusses how to undertake large fiscal adjustments, which often tend to be protracted and with long-lasting impacts on growth. Consequently, the note also highlights how to better prepare for future booms and busts in commodity prices.

Keywords: FADHTN; HTN; commodity; price; revenue; budget; commodity resource; commodity revenue; price fluctuation; revenue windfall; impact of commodity price booms; revenue boom; challenges facing commodity exporter; commodity exporter; revenue potential; resource boom; Fiscal consolidation; Commodity prices; Natural resources (search for similar items in EconPapers)
Pages: 18
Date: 2016-09-27
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Citations: View citations in EconPapers (10)

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