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Dances with Wolves: Weather and Health Disasters and Fiscal Sustainability in MENA

Author

Listed:
  • Eman Moustafa

    (General Authority for Investment and Free Zones)

  • Amira El-Shal

    (Cairo University)

Abstract

Fiscal sustainability is a major source of concern in light of successive weather and health disasters. We estimate the contemporaneous and long-run effects of weather vis-à-vis health disasters on the fiscal sustainability of 21 Middle East and North Africa (MENA) economies during 1990-2020 using two-way fixed-effects and two-step system generalized method of moments strategies. We also examine if domestic resource mobilization and external financing act as fiscal stabilizers that mitigate disaster effects. We find that weather disasters reduce the budget and overall fiscal balances by 2.1 percent and 2.2 percent instantaneously and by 5.4 percent and 6.2 percent after one year, respectively. Health disasters reduce the budget and overall fiscal balances respectively by 0.4 percent and 0.3 percent instantaneously, with no long-run effects observed. Our estimates indicate that government debt can help mitigate all types of disasters. Domestic resources from sovereign wealth funds and business taxation are more effective in mitigating the effects of weather disasters compared to external sources of finance. Countries with higher foreign reserves and net savings are better able to fiscally endure health disasters. This study emphasizes the significance of domestic resource mobilization visà-vis external sources of finance in times of disasters

Suggested Citation

  • Eman Moustafa & Amira El-Shal, 2021. "Dances with Wolves: Weather and Health Disasters and Fiscal Sustainability in MENA," Working Papers 1520, Economic Research Forum, revised 20 Dec 2021.
    • Handle: RePEc:erg:wpaper:1520
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    Cited by:

    1. El-Shal, Amira & Mohieldin, Mahmoud & Moustafa, Eman, 2022. "Indirect impact of health disasters on maternal and child mortality," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 477-493.

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