Fiscal Policy Sustainability in Oil-Producing Countries

Sheila Bassett, Claire Liuksila and Alejandro García

No 1994/137, IMF Working Papers from International Monetary Fund

Abstract: Assessing the sustainability of a given fiscal policy is especially important for countries that depend on income from exhaustible resources. Political and growth pressures may push governments to raise expenditure when revenue from exhaustible resources rises, but cutting outlays when price swings reduce income is often difficult. Traditional fiscal accounting may give a misleading view of policy sustainability. This paper argues that for countries in which a significant proportion of government revenue is derived from the exploitation of an exhaustible natural resource, fiscal policy sustainability can best be assessed within a permanent income framework that takes into account total government wealth, including the imputed wealth from reserves of natural resources. Using this framework, the paper takes a sample of six countries where government revenue from petroleum extraction is significant and draws conclusions about the sustainability of their fiscal policies during 1980-92.

Keywords: WP; exchange rate; net wealth; interest rate; financial position; oil price; wealth position; oil revenue; net government wealth position; net debtor position; net impact; net interest bill; net foreign exchange earner; net debtor; wealth projection; Oil; Fiscal stance; gas and mining taxes; Oil prices (search for similar items in EconPapers)
Pages: 72
Date: 1994-11-01
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Citations: View citations in EconPapers (9)

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