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Operational Aspects of Fiscal Policy in Oil-Producing Countries

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  • Steven Barnett
  • Rolando Ossowski
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    Abstract

    Oil-producing countries face challenges arising from the fact that oil revenue is exhaustible, volatile, and uncertain, and largely originates from abroad. Reflecting these challenges, the paper proposes some important general principles for the formulation and assessment of fiscal policy in these countries. The main findings can be summarized in some key guidelines: the non-oil balance should feature prominently in the formulation of fiscal policy; it should generally be adjusted gradually; the government should strive to accumulate substantial financial assets over the period of oil production; and, where necessary, strategies should aim at breaking procyclical fiscal responses to volatile oil prices.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/177.

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    Length: 35
    Date of creation: 01 Oct 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/177

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    Related research

    Keywords: Oil; Fiscal sustainability; fiscal policy; expenditure; government spending; expenditures; government expenditure; fiscal rules; medium-term expenditure frameworks; fiscal balance; fiscal variables; fiscal stance; fiscal balances; capital expenditure; public expenditure; fiscal deficits; fiscal costs; fiscal deficit; public debt; fiscal vulnerability; fiscal policies; expenditure policy; expenditure programs; fiscal adjustment; fiscal expenditures; medium-term expenditure; public spending; fiscal management; fiscal strategies; fiscal revenue; expenditure frameworks; aggregate demand; budget constraint; fiscal surpluses; expenditure cuts; fiscal position; fiscal adjustments; public finances; fiscal consolidation; expansionary fiscal policy; primary deficit; expansionary fiscal; tax revenue; fiscal rule; fiscal affairs department; fiscal perspective; expenditure framework; fiscal outcomes; expenditure increases; government revenue; national budget; fiscal policy decisions; fiscal policy responses; public spending programs; fiscal expansion; fiscal revenues; fiscal imbalances; fiscal planning; medium-term expenditure framework; government expenditures; fiscal policy rules; fiscal sustainability analysis; fiscal aggregates; fiscal issues; government budget; government budget constraint; tax revenues; fiscal sustainability analyses; public expenditure management; fiscal affairs; fiscal variable; fiscal contractions; primary fiscal balance; persistent fiscal deficits; fiscal indicators; fiscal prudence; fiscal strategy; discretionary fiscal policy; fiscal policy formulation; fiscal resources; revenue collection; fiscal analysis; fiscal consequences; prudent fiscal policies; taxation structure; fiscal policy variables; budget systems; expenditure planning; high spending; fiscal adjustment efforts; fiscal impulses; fiscal policy discussions; expenditure management; fiscal pressure; expenditure pattern;

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    Cited by:
    1. Milan Brahmbhatt & Otaviano Canuto, 2010. "Natural Resources and Development Strategy after the Crisis," World Bank Other Operational Studies 10212, The World Bank.
    2. Shafik Hebous, 2006. "On the Monetary Union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy.
    3. Landon, Stuart & Smith, Constance, 2014. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," Working Papers 2014-1, University of Alberta, Department of Economics.
    4. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria," IMF Working Papers 03/155, International Monetary Fund.
    5. Ilkin Sabiroglu & Samad Bashirli & Faiq Qasimli, 2011. "Creating a Favourable Deployment Mechanism of Oil and Gas Revenues with Regard to Volatile Oil Prices: The Case of Azerbaijan," Transition Studies Review, Springer, vol. 18(1), pages 179-199, September.
    6. Basher, Syed Abul & Fachin, Stefano, 2011. "The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States," MPRA Paper 29077, University Library of Munich, Germany.
    7. Milan Brahmbhatt & Otaviano Canuto & Ekaterina Vostroknutova, 2010. "Dealing with Dutch Disease," World Bank Other Operational Studies 10174, The World Bank.
    8. AREZKI Rabah & DUPUY Arnaud & GELB Alan, 2013. "Resource Windfalls, Optimal Public Investment and Redistribution: The Role of Total Factor Productivity and Administrative Capacity," CEPS/INSTEAD Working Paper Series 2013-12, CEPS/INSTEAD.
    9. Szklo, Alexandre & Schaeffer, Roberto & Delgado, Fernanda, 2007. "Can one say ethanol is a real threat to gasoline?," Energy Policy, Elsevier, vol. 35(11), pages 5411-5421, November.
    10. World Bank, 2005. "Kazakhstan : Country Economic Memorandum, Getting Competitive, Staying Competitive, The Challenge of Managing Kazakhstan's Oil Boom," World Bank Other Operational Studies 8656, The World Bank.
    11. Clemens, Marius & Fuhrmann, Wilfried, 2008. "Rohstoffbasierte Staatsfonds: Theorie und Empirie
      [Resource-based sovereign wealth funds]
      ," MPRA Paper 16933, University Library of Munich, Germany.
    12. International Monetary Fund, 2008. "Constraintson the Design and Implementation of Monetary Policy in Oil Economies," IMF Working Papers 08/142, International Monetary Fund.
    13. Ali, Issa & Harvie, Charles, 2013. "Oil and economic development: Libya in the post-Gaddafi era," Economic Modelling, Elsevier, vol. 32(C), pages 273-285.
    14. Peter Wierts & Guido Schotten, 2008. "Dutch natural Gas Revenues and Fiscal Policy: Theory versus Practice," DNB Occasional Studies 605, Netherlands Central Bank, Research Department.
    15. Roberto Iacono, 2012. "Is it really worse with a Bird in Hand? A comparison of fiscal rules for resource-rich economies," Working Paper Series 12612, Department of Economics, Norwegian University of Science and Technology.
    16. Basher, Syed Abul, 2010. "Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries," MPRA Paper 21059, University Library of Munich, Germany.
    17. Carlos Caceres & Serhan Cevik & Ricardo Fenochietto & Borja Gracia, 2013. "The Day After Tomorrow," IMF Working Papers 13/79, International Monetary Fund.
    18. Beck, Roland & Kamps, Annette, 2009. "Petrodollars and imports of oil exporting countries," Working Paper Series 1012, European Central Bank.

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