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Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana’s Reliance on Diamond Revenue

Author

Listed:
  • Olivier Basdevant

Abstract

This study assesses the sustainability of Botswana’s diamond-related fiscal revenue. Diamond reserves are not adequate to generate enough permanent revenue to sustain a high level of expenditure. Under the current fiscal rule that no debt may be accumulated, Botswana will have to save more to avoid an abrupt adjustment in the medium term.

Suggested Citation

  • Olivier Basdevant, 2008. "Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana’s Reliance on Diamond Revenue," IMF Working Papers 08/80, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/80
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    References listed on IDEAS

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    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    2. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    3. Atsushi Iimi, 2006. "Did Botswana Escape from the Resource Curse?," IMF Working Papers 06/138, International Monetary Fund.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
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    Cited by:

    1. van der Ploeg, Frederick & Venables, Anthony J, 2008. "Harnessing Windfall Revenues in Developing Economies: Sovereign Wealth Funds and Optimal Tradeoffs Between Citizen Dividends, Public Infrastructure and Debt Reduction," CEPR Discussion Papers 6954, C.E.P.R. Discussion Papers.
    2. 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;Central Eastern European University Network (CEEUN), vol. 18(1), pages 179-199, September.
    3. AfDB AfDB, . "Africa Competitiveness Report 2009," Africa Competitiveness Report, African Development Bank, number 11 edited by Adeleke Oluwole Salami, July-Dece.

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