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Fiscal Policy Sustainability in Oil-Producing Countries

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  • Sheila Bassett
  • Claire Liuksila
  • Alejandro García
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    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/137.

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    Length: 72
    Date of creation: 01 Nov 1994
    Date of revision:
    Handle: RePEc:imf:imfwpa:94/137

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    Cited by:
    1. International Monetary Fund, 2005. "Trinidad and tobago," IMF Working Papers 05/197, International Monetary Fund.
    2. 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.
    3. World Bank, 2003. "A Medium-Term Macroeconomic Strategy for Algeria : Sustaining Faster Growth with Economic and Social Stability, Volume 1. Main Report," World Bank Other Operational Studies 14999, The World Bank.
    4. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria," IMF Working Papers 03/155, International Monetary Fund.
    5. 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.
    6. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
    7. World Bank, 2003. "Azerbaijan : Public Expenditure Review," World Bank Other Operational Studies 13825, The World Bank.

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