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Public Debt and Fiscal Vulnerability in the Middle East

Author

Listed:
  • Ludvig Söderling
  • Hanan Morsy
  • Martin Petri
  • Martin Hommes
  • Manal Fouad
  • Wojciech Maliszewski

Abstract

Public debt in the Middle East increased during the mid-1990s mainly because of fiscal expansions. It decreased in recent years, thanks to high oil revenue, economic growth, some primary non-oil fiscal adjustment, and debt relief. While countries in the Middle East appear to have adequately reacted to high indebtedness in the past, public debt levels remain uncomfortably high in many, particularly non-oil producing countries and middle income oil producers. Non-oil countries adjust mainly by increasing revenues, whereas oil countries adjust expenditure. For non-oil producing countries, substantial fiscal adjustment would be needed to bring debt down to below 50 percent of GDP. Oil producers as a group appear to follow sustainable, though procyclical, fiscal policies. Middle-income (but not high-income) oil producing countries would need to adjust somewhat to bring their policies in line with the permanent oil income benchmark.

Suggested Citation

  • Ludvig Söderling & Hanan Morsy & Martin Petri & Martin Hommes & Manal Fouad & Wojciech Maliszewski, 2007. "Public Debt and Fiscal Vulnerability in the Middle East," IMF Working Papers 07/12, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/12
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=20210
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    References listed on IDEAS

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    1. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
    2. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
    3. International Monetary Fund, 2004. "Financial Sector Development in the Middle East and North Africa," IMF Working Papers 04/201, International Monetary Fund.
    4. Rodrigo O. Valdes & Eduardo M Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
    5. Taimur Baig & Abdul d Abiad, 2005. "Underlying Factors Driving Fiscal Effort in Emerging Market Economies," IMF Working Papers 05/106, International Monetary Fund.
    6. Dalia S Hakura, 2004. "Growth in the Middle East and North Africa," IMF Working Papers 04/56, International Monetary Fund.
    7. Jan-Peter Olters & Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy; Lessons from Gabon," IMF Working Papers 06/193, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Nese Erbil, 2011. "Cyclicality of Fiscal Behavior in Developing Oil-Producing Countries: An Empirical Review," Working Papers 638, Economic Research Forum, revised 10 Jan 2011.
    2. S M Ali Abbas & Nazim Belhocine & Asmaa El-Ganainy & Mark Horton, 2011. "Historical Patterns and Dynamics of Public Debt—Evidence From a New Database," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(4), pages 717-742, November.
    3. Andrea F. Presbitero, 2012. "Domestic debt in Low-Income Countries," Economics Bulletin, AccessEcon, vol. 32(2), pages 1099-1112.
    4. Wojciech Maliszewski, 2009. "Fiscal Policy Rules for Oil-Producing Countries; A Welfare-Based Assessment," IMF Working Papers 09/126, International Monetary Fund.
    5. Nese Erbil, 2011. "Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?," IMF Working Papers 11/171, International Monetary Fund.
    6. repec:wsi:medjxx:v:02:y:2010:i:02:n:s1793812010000228 is not listed on IDEAS
    7. Unver, Mustafa & Dogru, Bulent, 2015. "The Determinants of Economic Fragility: Case of the Fragile Five Countries," MPRA Paper 68734, University Library of Munich, Germany, revised 2015.

    More about this item

    Keywords

    Public debt; Fiscal policy; Oil; Middle East; oil producers; oil producing countries; oil producing; oil prices;

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