Fiscal Sustainability with Non-Renewable Resources
March 1, 1998
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Summary
This paper assesses sustainable fiscal behavior in an economy where wealth is derived predominantly from a non-renewable resource. It explores the issue in a simple dynamic framework that highlights the structural weaknesses in the underlying budgetary position, takes into account the rate of depletion of a country’s natural resource base, and examines the impact of changes in a country’s terms of trade. An alternative indicator of fiscal sustainability is derived, and the principal factors determining sustainability are identified. The results of the analysis are applied to Venezuela and Kuwait.
Subject: Environment, Fiscal policy, Fiscal stance, International trade, National accounts, Natural resources, Personal income, Terms of trade
Keywords: asset accumulation, core deficit, deficit-GDP ratio, Fiscal stance, Fiscal sustainability, government assets, natural resource, Natural resources, net asset position, non-renewable resource, oil producers, Personal income, private sector, rate of return, resource constraint, resource depletion, resource exploitation, resource wealth, Terms of trade, WP
Pages:
36
Volume:
1998
DOI:
Issue:
026
Series:
Working Paper No. 1998/026
Stock No:
WPIEA0261998
ISBN:
9781451844351
ISSN:
1018-5941
