A Primeron Fiscal Analysis in Oil-Producing Countries

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper proposes an integrated approach to fiscal policy analysis in oil producing countries (OPCs) geared towards addressing their unique and complex policy challenges. First, an accurate assessment of the fiscal stance in OPCs can be obscured by large and volatile oil revenue flows. Second, uncertain and volatile oil revenue flows can complicate the management of macroeconomic policies in these countries. Third, given the exhaustibility of oil reserves, OPCs need to address longer-term sustainability and intergenerational equity issues. The use of non-oil fiscal indicators, stress tests, medium-term frameworks, and permanent oil income models can greatly aid in addressing these challenges.

Exploring the Asymmetric Linkage between Commodity Prices and Fiscal Performance in Nigeria

“…In bad times, due to the entrenched spending habit, reversing expenditure trends seems unattainable, which leads to increasing deficits. For instance, Medas and Zakharova (2009) indicate that some countries have employed the past oil windfalls for public sector wage increase. This has occurred in Bolivia and Trinidad and Tobago, and commodities boom Argentina during the hydrocarbons windfalls.…”

Oil discovery and macroeconomic management: The recent Ghanaian experience

“…For many low-income countries, infrastructure needs are high, as is the demand for public-sector wages. Governments facing elections may attempt to respond to these two demands by embarking on infrastructure projects without conducting value-for-money audits, and also by increasing public-sector wages (Gelb 1986;Medas and Zakharova 2009). Under these circumstances, electoral imperatives may trump any fiscal rule.…”

Too Much of a Good Thing? Prudent Management of Inflows under Economic Citizenship Programs

“…Tradeoffs between increasing savings and reducing debt 24 Both measures should be presented in the fiscal accounts. For further information, see Medas and Zakharova (2009), IMF working paper (WP/09/56). 25 This may not be true for countries where debt is mostly concessional and where large deficits in infrastructure may allow for an overall investment return that is higher than cost of debt.…”