The Fiscal Management of Natural Resource Revenues in a Developing Country Setting (or How to Design a Fiscal Rule If You Are Not Norway)
The exhaustibility and volatility of natural resource revenues pose well-known economic challenges, of which those facing oil producers are the most prominent. If oil revenues represent an important share of export earnings and of government revenu...
| Main Authors: | , , |
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| Format: | Brief |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/04/16838127/fiscal-management-natural-resource-revenues-developing-country-setting http://hdl.handle.net/10986/16178 |
| Summary: | The exhaustibility and volatility of
natural resource revenues pose well-known economic
challenges, of which those facing oil producers are the most
prominent. If oil revenues represent an important share of
export earnings and of government revenues, then they can be
part of overheating during booms and costly adjustments
during downturns, making fiscal policy exacerbate
volatility. At the same time, considerations of
intergenerational equity suggest that fiscal policy should
also preserve part of current oil revenues for future
generations. To address both of these challenges,
resource-rich countries commonly establish commodity funds,
into which part of their resource-linked revenues are
deposited and invested in income-generating assets (usually
offshore financial assets). A key question in designing such
funds is what share of current revenues should be spent and
what share saved. Based on recent advisory services offered
to the Ministry of Economy and Trade in Kazakhstan, this
note summarizes one possible approach, aiming to provide
rule-based anchors for sustainable fiscal policy in an
oil-producing country. This approach applies traditional
permanent-income and debt sustainability frameworks, but
adapts the resulting recommendations to the institutional
context of the country. Rule-based fiscal frameworks offer
strong benefits to countries that are generating significant
government revenue from extractive industries. As commitment
devices, these frameworks can reinforce fiscally responsible
economic management, contain volatility, and preserve fiscal
savings for future generations. |
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