Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries: The Case of Cameroon

Issouf Samaké, Priscilla Muthoora and Bruno Versailles

No 2013/144, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses the implications of the use of oil revenue for public investment on growth and fiscal sustainability in Cameroon. We develop a dynamic stochastic general equilibrium model to analyze the effects of such investment on growth and on the path of key fiscal indicators, such as the non-oil primary deficit and public debt. Policy scenarios show that Cameroon’s large infrastructural needs and relatively low current debt levels could justify a temporary deviation from traditional policy advice that suggests saving part of the oil revenue to smooth expenditure over time. Model simulations show that a relatively high degree of efficiency of public investment is needed for scaled-up public investment to make a significant contribution to growth, while maintaining fiscal sustainability.

Keywords: WP; natural resource; debt ratio; capital stock; Cameroon; fiscal policy; DSGE; natural resource-rich countries; low-income countries; public investment; growth; efficiency parameter; investment flow; investment-growth nexus; efficiency level; investment path; Public investment spending; Oil; gas and mining taxes; Oil production; Sub-Saharan Africa; Africa; Global (search for similar items in EconPapers)
Pages: 35
Date: 2013-06-11
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Citations: View citations in EconPapers (6)

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