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Public Investment in a Developing Country Facing Resource Depletion

Author

Listed:
  • Mr. Adrian Alter
  • Matteo Ghilardi
  • Ms. Dalia S Hakura

Abstract

This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio. However, structural reforms that improve the efficiency of public investment can allow for a relatively faster buildup of sustainable public capital and sustain higher non-oil growth without adversely affecting the debt ratio or savings. Moreover, we show that even if a government pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of exhaustible and volatile resource revenues, low public investment quality in the form of a misallocation of resources can hinder attainment of sustainable public capital and positive non-oil growth.

Suggested Citation

  • Mr. Adrian Alter & Matteo Ghilardi & Ms. Dalia S Hakura, 2015. "Public Investment in a Developing Country Facing Resource Depletion," IMF Working Papers 2015/236, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2015/236
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    References listed on IDEAS

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