## From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia

_IMF Working Papers, April 30, 2015_

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## Bibliographic details
- Authors: Pranav Gupta, Grace B Li, Jiangyan Yu
- Published: April 30, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475570632.001

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### Summary and context
- Some resource-rich developing countries are in the process of harnessing immense mining resources towards inclusive growth and prosperity.
- Tapping into natural resources can be challenging because of:
  - large front-loaded investment,
  - volatile capital flows,
  - exposure to global commodity markets.
- Public investment is needed to remove often-large infrastructure gaps and unlock economic potential.
- Excessively rapid fiscal outlays can push the economy to its limit of absorptive capacity and increase macro-financial vulnerabilities.
- This paper applies a structural model-based approach to analyze macroeconomic impacts of different public investment strategies on fiscal and non-fiscal variables.

### Methodology
- The analysis utilizes a structural model-based approach.
- The model evaluates macroeconomic impacts of different public investment strategies on key variables such as:
  - debt,
  - consumption,
  - sovereign wealth fund,
  - real exchange rates.
- The model is applied to Mongolia as a case study.

### Main findings
- Fiscal policy adjustment is required to maintain macroeconomic and external stability.
- Moderating infrastructure investment is necessary to avoid exceeding absorptive capacity and to limit macro-financial vulnerabilities.
- Optimizing investment efficiency is needed to boost long-term sustainable growth for Mongolia.

### Policy recommendations
- Moderate the pace of infrastructure investment to align with the economy’s absorptive capacity.
- Optimize investment efficiency (improve the efficiency level/index of public investment projects).
- Implement fiscal policy adjustments and fiscal consolidation where appropriate to support debt sustainability and stability.
- Use a sovereign wealth fund and other fiscal instruments prudently as part of managing resource revenues and macroeconomic stabilization.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/from-natural-resource-boom-to-sustainable-economic-growth-lessons-for-mongolia-42851_