Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana’s Reliance on Diamond Revenue
IMF Working Papers, March 1, 2008
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- Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana’s Reliance on Diamond Revenue
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Bibliographic details
- Authors: Olivier Basdevant
- Published: March 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869415.001
Summary Findings
- The study assesses the sustainability of Botswana’s diamond-related fiscal revenue.
- Diamond reserves are not adequate to generate enough permanent revenue to sustain a high level of expenditure.
- Under the current fiscal rule that no debt may be accumulated, Botswana will have to save more to avoid an abrupt adjustment in the medium term.
- Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
Policy Implications and Recommendations
- Maintain or increase savings given the insufficiency of diamond reserves to sustain current expenditure levels.
- Reassess the fiscal rule that prohibits debt accumulation, as strict adherence implies larger required savings to smooth the transition and avoid abrupt medium-term adjustment.
Subject Areas and Keywords
- Subject: Expenditure, Fiscal consolidation, Fiscal rules, GDP measurement, Personal income
- Keywords: income, resource, revenue, WP