Macroeconomic Policy Frameworks for Resource-Rich Developing Countries

Policy Papers, August 24, 2012

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This paper aims to widen the prism through which Fund policy analysis is conducted for resource-rich developing countries (RRDCs).
Objective: develop new macro-fiscal frameworks and policy analysis tools for RRDCs that could enhance Fund policy advice.
Publication date: August 24, 2012.

Resource revenue exhaustibility gives rise to inter-temporal decisions on how much of the resource wealth to consume and how much to save.
Revenue volatility calls for appropriate fiscal rules and precautionary savings.
RRDCs face additional challenges relative to other resource-rich economies, including:
- lack of access to international capital markets
- domestic capital scarcity

Under certain conditions, it would be optimal for a significant share of a RRDC’s savings to be in domestic real assets (e.g., investment in domestic infrastructure).
Domestic investment considerations must account for absorptive capacity constraints to promote efficient spending.
Short-run policies are needed to preserve macroeconomic stability while expanding domestic real asset investment.

Design fiscal rules that address revenue volatility and support precautionary savings.
Prioritize policies that expand and improve absorptive capacity to ensure efficient use of domestic real asset investments.
Balance inter-temporal allocation of resource wealth between current consumption and savings to reflect exhaustibility.
Provide tailored macro-fiscal frameworks and policy analysis tools that reflect RRDCs’ limited access to external capital and domestic capital scarcity.

Macroeconomic Policy Frameworks for Resource-Rich Developing Countries, August 24, 2012 — International Monetary Fund