Public Investment in a Developing Country Facing Resource Depletion
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Summary:
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.
Series:
Working Paper No. 2015/236
Subject:
Expenditure Oil prices Oil, gas and mining taxes Prices Public debt Public investment spending Taxes
English
Publication Date:
November 10, 2015
ISBN/ISSN:
9781513530253/1018-5941
Stock No:
WPIEA2015236
Pages:
35
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