Prudential Management of Hydrocarbon Revenues in Resource-rich Transition Economies

Abstract

The post-Soviet political economy of Azerbaijan, Kazakhstan and Turkmenistan is characterised by authoritarian government, substantial public revenue from hydrocarbons and GDP per capita ranked 'low' to 'lower middle'. The first of these weakens prudential constraints on the allocation of the second, which by more industrial diversification and policies to foster wider technology spillover from foreign direct investment could enhance the third. All three governments have established funds which reserve part of resource income on the permanent income hypothesis, but state investment during the transition period is yielding lower returns than would capital formation by a private sector.

The Effects of Fiscal Policy on Non-Oil Economic Growth

“…Second, the main source of government spending is oil-export revenues and, hence, any changes in oil prices and exports reflect in government spending, as discussed in the Introduction. A number of studies discuss the mechanism of oil-revenue management and show that spending part of the revenues through the government budget is drastically high in Azerbaijan compared to other similar oil-exporting economies (see Wakeman-Linn et al 2002;Kalyuzhnova and Kaser 2006;Bagirov 2006;Paczynski and Tochitskaya 2008;Sturm et al 2009;Joutz 2013 and. Third, government budget expenditures, particularly capital spending in the form of large-scale infrastructure and social projects, are mainly oriented to non-tradable branches such as construction and service, which are the main parts of the non-oil sector.…”

Volume 9, Issue 4

“…According to his findings, an oil-dominated economy, high accumulation of fortune by the nation's elite, political legitimacy problems, and centralized political control were clear signs of the NRC. Other indications of the NRC's political and institutional channel include internal and external patronage networks, clientelism (Bayulgen, 2005;Guliyev, 2009), autocracy (Schubert, 2006;Pomfret, 2011;Kendall and Taylor, 2012;Radnitz, 2012), problems with political freedom and democracy (Altstadt, 2017), transparency and accountability issues in revenue spending (Wakeman-Linn et al, 2003;Franke et al, 2009), and intense pushback to private sector expansion (Kalyuzhnova and Kaser, 2005). A further indication is neopatrimonialism, which refers to informal personalized rule combined with pyramidal power structures (Franke and Gawrich, 2010;Heinrich, 2010).…”

State governance evolution in resource-rich transition economies: An application to Russia and Kazakhstan

“…Another common denominator is the importance of commodity production-in particular oil and gas. A number of articles of Kalyuzhnova (2006) and Kalyuzhnova and Kaser (2006) have examined the institutional structures for managing petroleum revenues in several of the Caspian Sea states. In particular, the channelling of revenue into ''stabilisation funds'' is intended to smooth future income projections (and hence government revenues/public spending) and enable industrial diversification (reduce commodities dependency).…”