{
  "title": "The 'Fiscal Presource Curse': Giant Discoveries and Debt Sustainability",
  "publication": "IMF Working Papers, January 21, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2022/01/21/the-fiscal-presource-curse-giant-discoveries-and-debt-sustainability-511950",
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  "summary": "This paper investigates the dynamic impact of natural resource discoveries on government debt sustainability. We use a ‘natural experiment’ framework in which the timing of discoveries is treated as an exogenous source of within-country variation.",
  "sections": [
    {
      "heading": "Overview and methodology",
      "content": "- Research question: Investigates the dynamic impact of natural resource discoveries on government debt sustainability.\n- Empirical framework: Uses a ‘natural experiment’ framework in which the timing of discoveries is treated as an exogenous source of within-country variation.\n- Data combined:\n  - Government debt, fiscal stress and debt distress episodes on a large panel of countries over 1970-2012.\n  - A global repository of giant oil, gas, and mineral discoveries."
    },
    {
      "heading": "Key findings",
      "content": "- Evidence of a “fiscal presource curse”: natural resources can jeopardize fiscal sustainability even before “the first drop of oil is pumped”.\n- Giant discoveries, mostly of oil and gas, lead to permanently higher government debt.\n- Giant discoveries eventually lead to debt distress episodes.\n- The adverse effects are especially pronounced in countries with weaker political institutions and governance."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- The fiscal presource curse can be mitigated and even prevented by:\n  - Pursuing prudent fiscal policies and borrowing strategies.\n  - Strengthening fiscal governance.\n  - Implementing transparent and robust fiscal frameworks for resource management."
    },
    {
      "heading": "Publication and metadata",
      "content": "- Authors: Matteo Ruzzante, Nelson Sobrinho\n- Date: January 21, 2022\n- Series: Working Paper No. 2022/010\n- Issue: 010\n- Volume: 2022\n- Pages: 77\n- DOI: https://doi.org/10.5089/9781616358990.001\n- Subjects: Commodities, Debt sustainability, Environment, External debt, Natural resources, Non-renewable resources, Oil, Public debt\n- Keywords: A.II governance indicator, debt distress episode, debt measure, Debt sustainability, Fiscal policy, giant discovery, Global, government financial assets, Mines, Natural resources, Non-renewable resources, Oil, Political institutions, Resource curse\n\nIMF Working Paper — \"The 'Fiscal Presource Curse': Giant Discoveries and Debt Sustainability\", Matteo Ruzzante and Nelson Sobrinho, January 21, 2022.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2022/01/21/the-fiscal-presource-curse-giant-discoveries-and-debt-sustainability-511950"
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    "Authors: Matteo Ruzzante, Nelson Sobrinho",
    "Published: January 21, 2022",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781616358990.001",
    "Research question: Investigates the dynamic impact of natural resource discoveries on government debt sustainability.",
    "Empirical framework: Uses a ‘natural experiment’ framework in which the timing of discoveries is treated as an exogenous source of within-country variation.",
    "Data combined:",
    "Evidence of a “fiscal presource curse”: natural resources can jeopardize fiscal sustainability even before “the first drop of oil is pumped”.",
    "Giant discoveries, mostly of oil and gas, lead to permanently higher government debt.",
    "Giant discoveries eventually lead to debt distress episodes.",
    "The adverse effects are especially pronounced in countries with weaker political institutions and governance.",
    "The fiscal presource curse can be mitigated and even prevented by:",
    "Authors: Matteo Ruzzante, Nelson Sobrinho",
    "Date: January 21, 2022",
    "Series: Working Paper No. 2022/010",
    "Issue: 010",
    "Volume: 2022",
    "Pages: 77",
    "DOI: https://doi.org/10.5089/9781616358990.001",
    "Subjects: Commodities, Debt sustainability, Environment, External debt, Natural resources, Non-renewable resources, Oil, Public debt",
    "Keywords: A.II governance indicator, debt distress episode, debt measure, Debt sustainability, Fiscal policy, giant discovery, Global, government financial assets, Mines, Natural resources, Non-renewable resources, Oil, Political institutions, Resource curse",
    "**Working Paper**"
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