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Fiscal Policy Sustainability in Oil-Producing Countries


  • Sheila Bassett
  • Claire Liuksila
  • Alejandro García


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

  • Sheila Bassett & Claire Liuksila & Alejandro García, 1994. "Fiscal Policy Sustainability in Oil-Producing Countries," IMF Working Papers 94/137, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:94/137

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    References listed on IDEAS

    1. Rodrigo O. Valdes & Eduardo M Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
    2. Alonso A Segura Vasi, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis; The Case of São Tomé and Príncipe," IMF Working Papers 06/183, International Monetary Fund.
    3. Stéphane Carcillo & Mauricio Villafuerte & Daniel Leigh, 2007. "Catch-Up Growth, Habits, Oil Depletion, and Fiscal Policy; Lessons from the Republic of Congo," IMF Working Papers 07/80, International Monetary Fund.
    4. 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.
    5. Daniel Leigh & Etibar Jafarov, 2007. "Alternative Fiscal Rules for Norway," IMF Working Papers 07/241, International Monetary Fund.
    6. 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.
    7. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers 07/107, International Monetary Fund.
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. 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.
    2. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria; Any Role for Rules?," IMF Working Papers 03/155, International Monetary Fund.
    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. International Monetary Fund, 2005. "Trinidad and tobago; The Energy Boom and Proposals for a Sustainable Fiscal Policy," IMF Working Papers 05/197, International Monetary Fund.
    5. 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.
    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.
    8. 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.


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