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Fiscal Policy Sustainability in Oil-Producing Countries

Author

Listed:
  • Ms. Sheila Bassett
  • Mrs. Claire Liuksila
  • Alejandro García

Abstract

Assessing the sustainability of a given fiscal policy is especially important for countries that depend on income from exhaustible resources. Political and growth pressures may push governments to raise expenditure when revenue from exhaustible resources rises, but cutting outlays when price swings reduce income is often difficult. Traditional fiscal accounting may give a misleading view of policy sustainability. This paper argues that for countries in which a significant proportion of government revenue is derived from the exploitation of an exhaustible natural resource, fiscal policy sustainability can best be assessed within a permanent income framework that takes into account total government wealth, including the imputed wealth from reserves of natural resources. Using this framework, the paper takes a sample of six countries where government revenue from petroleum extraction is significant and draws conclusions about the sustainability of their fiscal policies during 1980-92.

Suggested Citation

  • Ms. Sheila Bassett & Mrs. Claire Liuksila & Alejandro García, 1994. "Fiscal Policy Sustainability in Oil-Producing Countries," IMF Working Papers 1994/137, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1994/137
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    Citations

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    Cited by:

    1. Mr. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria: Any Role for Rules?," IMF Working Papers 2003/155, International Monetary Fund.
    2. Cosimo Magazzino, 2022. "Fiscal sustainability in the GCC countries," International Journal of Economic Policy Studies, Springer, vol. 16(2), pages 389-408, August.
    3. Gustavo Garcia Osio & Rafael Rodriguez Balza & Luis Marcano & Ricardo Penfold & Gustavo Sanchez, 1998. "La sostenibilidad de la política fiscal en el América Latina: El caso de Venezuela," Research Department Publications 3016, Inter-American Development Bank, Research Department.
    4. World Bank, 2003. "A Medium-Term Macroeconomic Strategy for Algeria : Sustaining Faster Growth with Economic and Social Stability, Volume 1. Main Report," World Bank Publications - Reports 14999, The World Bank Group.
    5. World Bank, 2003. "Azerbaijan : Public Expenditure Review," World Bank Publications - Reports 13825, The World Bank Group.
    6. El Anshasy, Amany A. & Bradley, Michael D., 2012. "Oil prices and the fiscal policy response in oil-exporting countries," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 605-620.
    7. Olusegun Akanbi, 2015. "Fiscal policy and current account in an oil-rich economy: the case of Nigeria," Empirical Economics, Springer, vol. 48(4), pages 1563-1585, June.
    8. International Monetary Fund, 2005. "Trinidad and tobago: The Energy Boom and Proposals for a Sustainable Fiscal Policy," IMF Working Papers 2005/197, International Monetary Fund.
    9. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.

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