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Debt Sustainability Public Investment And Natural Resources In Developing Countries
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Book Synopsis Debt Sustainability, Public Investment, and Natural Resources in Developing Countries by : Mr.Giovanni Melina
Download or read book Debt Sustainability, Public Investment, and Natural Resources in Developing Countries written by Mr.Giovanni Melina and published by International Monetary Fund. This book was released on 2014-04-01 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the DIGNAR (Debt, Investment, Growth, and Natural Resources) model, which can be used to analyze the debt sustainability and macroeconomic effects of public investment plans in resource-abundant developing countries. DIGNAR is a dynamic, stochastic model of a small open economy. It has two types of households, including poor households with no access to financial markets, and features traded and nontraded sectors as well as a natural resource sector. Public capital enters production technologies, while public investment is subject to inefficiencies and absorptive capacity constraints. The government has access to different types of debt (concessional, domestic and external commercial) and a resource fund, which can be used to finance public investment plans. The resource fund can also serve as a buffer to absorb fiscal balances for given projections of resource revenues and public investment plans. When the fund is drawn down to its minimal value, a combination of external and domestic borrowing can be used to cover the fiscal gap in the short to medium run. Fiscal adjustments through tax rates and government non-capital expenditures—which may be constrained by ceilings and floors, respectively—are then triggered to maintain debt sustainability. The paper illustrates how the model can be particularly useful to assess debt sustainability in countries that borrow against future resource revenues to scale up public investment.
Book Synopsis Natural Gas, Public Investment and Debt Sustainability in Mozambique by : Mr.Giovanni Melina
Download or read book Natural Gas, Public Investment and Debt Sustainability in Mozambique written by Mr.Giovanni Melina and published by International Monetary Fund. This book was released on 2013-12-23 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mozambique has great potential in natural gas reserves and if liquefied/commercialized the sum of taxes and other fiscal revenue from natural gas will, at its peak, reach roughly one third of total fiscal revenue. Recent developments in the natural resource sector have triggered a fresh round of much needed infrastructure investment. This paper uses the DIGNAR model to simulate alternative public investment scaling-up plans in alternative LNG market scenarios. Results show that while a conservative approach, which simply awaits LNG revenues, would miss significant current growth opportunities, an aggressive approach would likely meet absorptive capacity constraints and imply a much bigger (and, in an adverse scenario, unsustainable) build-up of public debt. A gradual scaling up approach represents indeed a desirable path, as it allows anticipating some, though not all, of the LNG revenue and, even in an adverse scenario, keeping public debt at sustainable levels. Structural reforms affecting selection, governance and execution of public investment projects would significantly enhance the extent to which public capital is accumulated and impact non-resource growth and, ultimately, debt sustainability.
Book Synopsis Public Investment in a Developing Country Facing Resource Depletion by : Adrian Alter
Download or read book Public Investment in a Developing Country Facing Resource Depletion written by Adrian Alter and published by International Monetary Fund. This book was released on 2015-11-10 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio. However, structural reforms that improve the efficiency of public investment can allow for a relatively faster buildup of sustainable public capital and sustain higher non-oil growth without adversely affecting the debt ratio or savings. Moreover, we show that even if a government pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of exhaustible and volatile resource revenues, low public investment quality in the form of a misallocation of resources can hinder attainment of sustainable public capital and positive non-oil growth.
Book Synopsis From Natural Resource Boom to Sustainable Economic Growth by : Pranav Gupta
Download or read book From Natural Resource Boom to Sustainable Economic Growth written by Pranav Gupta and published by International Monetary Fund. This book was released on 2015-04-30 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Some resource-rich developing countries are in the process of harnessing immense mining resources towards inclusive growth and prosperity. Nevertheless, tapping into natural resources could be challenging given the large front-loaded investment, volatile capital flows and exposure to global commodity markets. Public investment is needed to remove the often-large infrastructure gap and unlock the economic potential. However, too rapid fiscal outlays could push the economy to its limit of absorptive capacity and increase macro-financial vulnerabilities. This paper utilizes a structural model-based approach to analyze macroeconomic impacts of different public investment strategies on key fiscal and non-fiscal variables such as debt, consumption, sovereign wealth fund, and real exchange rates. We apply the model to Mongolia and draw policy recommendations from the analysis. We find that fiscal policy adjustment, particularly moderating infrastructure investment and optimizing investment efficiency is needed to maintain macroeconomic and external stability, as well as to boost the long-term sustainable growth for Mongolia.
Book Synopsis Public Debt Sustainability in Developing Asia by : Benno Ferrarini
Download or read book Public Debt Sustainability in Developing Asia written by Benno Ferrarini and published by Routledge. This book was released on 2012 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the global financial crisis has required fiscal intervention on a substantial scale by governments around the world. The consequent buildup of public debt, in particular its sustainability, has moved to center stage in the policy debate. If the Asia and Pacific region is to continue to serve as an engine for global growth, its public debt must be sustainable. Public Debt Sustainability in Developing Asia addresses this issue for Asia and the Pacific as a whole as well as for three of the most dynamic economies in the region: the People’s Republic of China, India, and Viet Nam. The book begins with a discussion of the reasons for increased attention to debt-related issues. It also introduces fiscal indicators for the Asian Development. Bank’s developing member countries and economies. The sustainability of their debt is assessed through extant approaches and with the most up-to-date data sources. The book also surveys the existing literature on debt sustainability, outlining the main issues related to it, and discusses the key implications for the application of debt sustainability analysis in developing Asia. Also highlighted is the importance of conducting individual country studies in view of wide variations in definitions of public expenditure, revenues, contingent liabilities, government structures (e.g., federal), and the like, as well as the impact of debt on interest rates. The book further provides in-depth debt sustainability analyses for the People’s Republic of China, India, and Viet Nam. Public Debt Sustainability in Developing Asia offers a comprehensive analytical and empirical update on the sustainability of public debt in the region. It breaks new ground in examining characteristics that are crucial to understanding sustainability and offers richer policy analysis that should prove useful for policymakers, researchers, and graduate students.
Book Synopsis Public Investment, Growth, and Debt Sustainability by : Mr.Andrew Berg
Download or read book Public Investment, Growth, and Debt Sustainability written by Mr.Andrew Berg and published by International Monetary Fund. This book was released on 2012-06-01 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model to study the macroeconomic effects of public investment surges in low-income countries, making explicit: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv) the macroeconomic adjustment required to ensure internal and external balance. Well-executed high-yielding public investment programs can substantially raise output and consumption and be self-financing in the long run. However, even if the long run looks good, transition problems can be formidable when concessional financing does not cover the full cost of the investment program. Covering the resulting gap with tax increases or spending cuts requires sharp macroeconomic adjustments, crowding out private investment and consumption and delaying the growth benefits of public investment. Covering the gap with domestic borrowing market is not helpful either: higher domestic rates increase the financing challenge and private investment and consumption are still crowded out. Supplementing with external commercial borrowing, on the other hand, can smooth these difficult adjustments, reconciling the scaling up with feasibility constraints on increases in tax rates. But the strategy may be also risky. With poor execution, sluggish fiscal policy reactions, or persistent negative exogenous shocks, this strategy can easily lead to unsustainable public debt dynamics. Front-loaded investment programs and weak structural conditions (such as low returns to public capital and poor execution of investments) make the fiscal adjustment more challenging and the risks greater.
Book Synopsis Public Debt in Developing Countries by : Indermit Singh Gill
Download or read book Public Debt in Developing Countries written by Indermit Singh Gill and published by World Bank Publications. This book was released on 2005 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Over the past 25 years, significant levels of public debt and external finance are more likely to have enhanced macroeconomic vulnerability than economic growth in developing countries. This applies not just to countries with a history of high inflation and past default, but also to those in East Asia, with a long tradition of prudent macroeconomic policies and rapid growth. The authors examine why with the help of a conceptual framework drawn from the growth, capital flows, and crisis literature for developing countries with access to the international capital markets (market access countries or MACs). They find that, while the chances of another generalized debt crisis have receded since the turbulence of the late 1990s, sovereign debt is indeed constraining growth in MACs, especially those with debt sustainability problems ... " -- Cover verso.
Book Synopsis Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries by : Issouf Samaké
Download or read book Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries written by Issouf Samaké and published by International Monetary Fund. This book was released on 2013-06-11 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the implications of the use of oil revenue for public investment on growth and fiscal sustainability in Cameroon. We develop a dynamic stochastic general equilibrium model to analyze the effects of such investment on growth and on the path of key fiscal indicators, such as the non-oil primary deficit and public debt. Policy scenarios show that Cameroon’s large infrastructural needs and relatively low current debt levels could justify a temporary deviation from traditional policy advice that suggests saving part of the oil revenue to smooth expenditure over time. Model simulations show that a relatively high degree of efficiency of public investment is needed for scaled-up public investment to make a significant contribution to growth, while maintaining fiscal sustainability.
Book Synopsis Public Investment in Resource-Abundant Developing Countries by : Mr. Andrew Berg
Download or read book Public Investment in Resource-Abundant Developing Countries written by Mr. Andrew Berg and published by Oxford University Press. This book was released on 2012-11-15 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of investing natural resource revenues, making explicit the role of pervasive features in these countries including public investment inefficiency, absorptive capacity constraints, Dutch disease, and financing needs to sustain capital. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. Using the model, country applications show how combining public investment with a resource fund---a sustainable investing approach---can help address the macroeconomic problems associated with both exhaustibility and volatility. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up (accounting for the financing needs to sustain capital) and the adequate size of a stabilization fund (buffer).
Book Synopsis The 'Fiscal Presource Curse': Giant Discoveries and Debt Sustainability by : Matteo Ruzzante
Download or read book The 'Fiscal Presource Curse': Giant Discoveries and Debt Sustainability written by Matteo Ruzzante and published by International Monetary Fund. This book was released on 2022-01-21 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the dynamic impact of natural resource discoveries on government debt sustainability. We use a 'natural experiment' framework in which the timing of discoveries is treated as an exogenous source of within-country variation. We combine data on government debt, fiscal stress and debt distress episodes on a large panel of countries over 1970-2012, with a global repository of giant oil, gas, and mineral discoveries. We find strong and robust evidence of a 'fiscal presource curse', i.e., natural resources can jeopardize fiscal sustainability even before 'the first drop of oil is pumped'. Specifically, we find that giant discoveries, mostly of oil and gas, lead to permanently higher government debt and, eventually, debt distress episodes, specially in countries with weaker political institutions and governance. This evidence suggest that the curse can be mitigated and even prevented by pursuing prudent fiscal policies and borrowing strategies, strengthening fiscal governance, and implementing transparent and robust fiscal frameworks for resource management.
Book Synopsis Current Account Norms in Natural Resource Rich and Capital Scarce Economies by : Juliana Dutra Araujo
Download or read book Current Account Norms in Natural Resource Rich and Capital Scarce Economies written by Juliana Dutra Araujo and published by International Monetary Fund. This book was released on 2013-03-27 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The permanent income hypothesis implies that frictionless open economies with exhaustible natural resources should save abroad most of their resource windfalls and, therefore, feature current account surpluses. Resource-rich developing countries (RRDCs), on the other hand, face substantial development needs and tight external borrowing constraints. By relaxing these constraints and providing a key financing source for public investment in RRDCs, temporary resource revenues might then be associated with current account deficits, or at least low surpluses. This paper develops a neoclassical model with private and public investment and several frictions that capture pervasive features in RRDCs, including absorptive capacity constraints, inefficiencies in investment, and borrowing constraints that can be relaxed when natural resources lower the country risk premium. The model is used to study the role of investment and these frictions in shaping the current account dynamics under windfalls. Since consumption and investment decisions are optimal, the model also serves to provide current account benchmarks (norms). We apply the model to the Economic and Monetary Community of Central Africa and discuss how our results can be used to inform the current account norm analysis pursued at the International Monetary Fund.
Book Synopsis Some Policy Lessons from Country Applications of the DIG and DIGNAR Models by : Daniel Gurara
Download or read book Some Policy Lessons from Country Applications of the DIG and DIGNAR Models written by Daniel Gurara and published by International Monetary Fund. This book was released on 2019-03-18 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past seven years, the DIG and DIGNAR models have complemented the IMF and World Bank debt sustainability framework (DSF) analysis, over 65 country applications. They have provided useful insights in the context of program and surveillance work, based on qualitative and quantitative analysis of the macroeconomic effects of public investment scaling-ups. This paper takes stock of the model applications and extensions, and extract five common policy lessons from the universe of country cases. First, improving public investment efficiency and/or raising the rate of return of public projects raises growth and lowers the risks associated with debt sustainability. Second, prudent and gradual investment scaling-ups are preferable to aggressive front-loaded ones, in terms of private sector crowding-out effects, absorptive capacity constraints, and debt sustainability risks. Third, domestic revenue mobilization helps create fiscal space for investment scaling-ups, by effectively containing public debt surges and their later-on repayments. Fourth, aid smoothens fiscal adjustments associated with public investment increases and may lower the risks of unsustainable debt. Fifth, external savings mitigate Dutch disease macroeconomic effects and serve as fiscal buffers. The paper also discusses how these models were used to estimate the quantitative macro economic effects associated with these lessons.
Book Synopsis Public Investment Scaling-up and Debt Sustainability by : Ahmed El-Ashram
Download or read book Public Investment Scaling-up and Debt Sustainability written by Ahmed El-Ashram and published by International Monetary Fund. This book was released on 2017-06-15 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The question of how scaling up public investment could affect fiscal and debt sustainability is key for countries needing to fill infrastructure gaps and build resilience. This paper proposes a bottom-up approach to assess large public investments that are potentially self-financing and reflect their impact in macro-fiscal projections that underpin the IMF’s Debt Sustainability Analysis Framework. Using the case of energy sector investments in Caribbean countries, the paper shows how to avoid biases against good projects that pay off over long horizons and ensure that transformative investments are not sacrificed to myopic assessments of debt sustainability risks. The approach is applicable to any macro-critical investment for which user fees can cover financing costs and which has the potential to raise growth without crowding-out.
Author :International Monetary Fund. Strategy, Policy, & Review Department Publisher :International Monetary Fund ISBN 13 :1498346359 Total Pages :111 pages Book Rating :4.4/5 (983 download)
Book Synopsis Review of the Debt Sustainability Framework for Low Income Countries by : International Monetary Fund. Strategy, Policy, & Review Department
Download or read book Review of the Debt Sustainability Framework for Low Income Countries written by International Monetary Fund. Strategy, Policy, & Review Department and published by International Monetary Fund. This book was released on 2017-02-10 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Debt Sustainability Framework for Low-income Countries (LIC DSF) has been the cornerstone of assessments of risks to debt sustainability in LICs. The framework classifies countries based on their assessed debt-carrying capacity, estimates threshold levels for selected debt burden indicators, evaluates baseline projections and stress test scenarios relative to these thresholds, and then combines indicative rules and staff judgment to assign risk ratings of external debt distress. The framework has demonstrated its operational value since the last review was conducted in 2012, but there are areas where new features can be introduced to enhance its performance in assessing risks. Against the backdrop of the evolving nature of risks facing LICs, both staff analysis and stakeholder feedback suggest gaps in the framework to be addressed. Complexity and lack of transparency have also been highlighted as causes for concern. This paper proposes a set of reforms to enhance the value of the LIC DSF for all users. In developing these reforms, staff has been guided by two over-arching principles: a) the core architecture of the DSF—model-based results complemented by judgment—remains appropriate; and b) reforms should ensure that the DSF maintains an appropriate balance by providing countries with early warnings of potential debt distress without unnecessarily constraining their borrowing for development.
Book Synopsis Public Debt Sustainability by : Barry W. Poulson
Download or read book Public Debt Sustainability written by Barry W. Poulson and published by Rowman & Littlefield. This book was released on 2022-01-04 with total page 389 pages. Available in PDF, EPUB and Kindle. Book excerpt: As countries recover from the coronavirus pandemic, they are confronted with an even more challenging debt crisis. Xavier Debrun argues in the foreword that in deciding where we go from here that there is no longer a consensus regarding the optimum design and enforcement of fiscal rules. Rather we must address a series of questions and challenges to the conventional wisdom. This book provides an opportunity for scholars to explore these questions from an international perspective, with reference to European countries, and emerging nations as well as the United States.
Book Synopsis Public Debt Sustainability in Developing Asia by : Benno Ferrarini
Download or read book Public Debt Sustainability in Developing Asia written by Benno Ferrarini and published by Routledge. This book was released on 2012-11-12 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the Global Financial Crisis required fiscal intervention on a substantial scale by governments around the world. The consequent build up of public debt, in particular its sustainability, have moved centre stage in the policy debate. If the Asia Pacific region is to continue to serve as an engine for global growth its public debt must be sustainable. The book addresses this issue for Asia Pacific as a whole as well as for three of the most dynamic economies in the region: China, India and Vietnam. The book begins with a discussion of the reasons why there is increased attention on debt related issues and outline the contents of the volume. The book also includes fiscal indicators for Developing Member Countries (DMCs) as categorized by the Asian Development Bank (ADB). Debt sustainability for these countries is assessed through extant approaches and with the most updated data sources. It also surveys the extant literature on debt sustainability, outlining the main issues related to debt sustainability and discusses the key implications for the application of debt sustainability analysis in developing Asia. The book highlights the importance of doing individual country studies in view of wide variations in definitions of public expenditure, revenues, contingent liabilities, government structures (e.g. federal), and the like as well as in the impact of debt on interest rates. It provides in-depth debt sustainability analyses of China, India and Vietnam. The book is a comprehensive analytical and empirical update of the sustainability public debt in developing Asia. It breakes new ground in that various characteristics of the sustainability that have not yet been explored in the literature which, nevertheless, are crucial to understanding it. As a consequence, the policy analysis is based on firmer footings than in the extant literature and should prove useful to graduate students, researchers as well as policymakers.
Book Synopsis Harnessing Resource Wealth for Inclusive Growth in Fragile States by : Ms.Corinne Delechat
Download or read book Harnessing Resource Wealth for Inclusive Growth in Fragile States written by Ms.Corinne Delechat and published by International Monetary Fund. This book was released on 2015-02-11 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Like other fragile sub-Saharan African countries, Côte d’Ivoire, Guinea, Liberia, and Sierra Leone are seeking to harness their natural resource potential in the context of ambitious development strategies. This study investigates options for scaling up public investment and expanding social safety nets in a general equilibrium setting. First, it assesses the macro-fiscal implications of alternative fiscal rules for public investment, and, second, it explicitly accounts for redistribution through direct cash transfers. Results show that a sustainable non-resource deficit target is robust to the high uncertainty of resources output and prices, while delivering growth benefits through higher public investment. The scaling-up magnitudes, however, depend on the size of projected resource revenue and absorptive capacity. Adding a social transfer raises private consumption, suggesting that a fraction of the resource revenue could be used to expand safety nets.
