Fiscal Sustainability in Heavily Indebted Countries Dependenton Nonrenewable Resources: The Case of Gabon

Abstract

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. This paper proposes a framework for assessing fiscal sustainability in heavily indebted countries dependent on exhaustible resources, with reference to Gabon. It finds that fiscal sustainability could be achieved by: (i) developing a fiscal rule for the non-oil primary fiscal balance compatible with an objective for reducing the debt-to-non-oil GDP ratio; (ii) introducing a constant oil-based income transfer per capita allowing intergenerational equity; and (iii) building up an oil savings fund. Long-term simulations show that Gabon's fiscal position is fragile and that a fiscal policy path consistent with the proposed framework could help achieve comfortable levels of net wealth.

Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons From Gabon

“…7 A number of authors have pointed to the fragility of Gabon's non-oil sectors, an overly generous public sector, and the inherently adverse debt dynamics (Barro Chambrier, 1990). More recently, formal models have been proposed by Ntamatungiro (2004) and Söderling (2005) that demonstrate the need for establishing a more sustainable fiscal path in Gabon.…”

IMF Research Bulletin, March 2005

“…Finally, several studies that consider the sustainability of fiscal policy in an "oil-dependent" economy recommend focusing on the "core deficit" (the overall deficit less net transfers and oil and investment income) as a more appropriate indicator of fiscal stance, especially for countries with an oil sector in decline. (See Chalk, 1998, for Venezuela and Kuwait;Baunsgaard, 2003, for Nigeria;and Ntamatungiro, 2004, for Gabon.) Barnett and Ossowki (2002) provide a comprehensive review of the operational aspects of fiscal policy in oil-exporting countries, recommending that these countries operate on the assumption that oil revenue is a nonpermanent component of the budget.…”

Contested Terrain of Sustainable Development Paradigm in Sierra Leone

“…In as much as the intention of developmental efforts are normally based on the underlying intent of enhancing (the) well-being of people, it can also likely be faced with challenges in a trade-off between present sacrifices in a bid that future gains can be realised. Since the bitter experiences of the financial crisis in the years 2007-09, countries around the world have been working hard at placing emphasis on developmental policies geared towards sustaining the earth's resources -some of these have incorporated core measures around macro-prudential policies to protect a further collapse(s) in the financial system and budgetary sustainability (Ntamatungiro, 2004 andJackson, 2018c), while others, like the UK new deal approach have addressed topical issues around the curtailment of civil crisis (a redress of the Rio de Janeiro treaty in 1992) and welfare protection for the venerables in time of distress (Jessop, 2012).…”