This series aims to make available to the general public and to economic policy practitioners, a selection of policy papers prepared by the staff of the International Monetary Fund. Papers in the International Economic Policy Review will offer specific policy-relevant analysis, but at a relatively non-technical level. These papers are intended to provide analytical background for IMF-supported programs and more generally to shed light on a range of policy choices facing ministries and central banks.
This paper considers whether countries should spend or save a fiscal surplus, and whether a surplus that is saved should be used to pay off public debt or to purchase financial assets. There are circumstances when a surplus should be spent, either by lowering taxes or increasing expenditure. If a surplus is to be saved, it will often be appropriate to purchase domestic and foreign assets rather than pay off public debt. Surpluses that reflect the exploitation of resource wealth are often saved in this way, but it is also appropriate to purchase assets under other circumstances.
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