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Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

While it may not be possible to identify an “optimal” fiscal policy for oil countries in general, the discussions in the previous section provide important issues for consideration by policymakers. In this section, we present some operational issues to help in the design of schemes for the use of oil revenue. This subsection presents (1) the case for a rule-based fiscal policy and (2) possible fiscal rules, including two “extremes” to be used as guideposts for the possible range of expenditure profiles.

Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

The discussion in the previous chapters leads to some key conclusions. First, the Mauritian growth performance since the 1970s has been exceptional.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

Africa is home to some 30 regional trade arrangements (RTAs), many of which are part of deeper regional integration schemes.1 On average, each African country belongs to four RTAs (World Bank, 2004). There has been a renewed push in recent years for broader and deeper preferential trade arrangements in Africa. Some of the previously defunct regional arrangements (e.g., the East African Community) have been revived, while continental institutions—namely, the African Economic Community (AEC), the African Union, and the New Partnership for Africa’s Development (NEPAD)—have been launched under the auspices of the Organization of African Unity (OAU). In addition, African countries are preparing to negotiate FTAs with the European Union (EU) under the Economic Partnership Agreements (EPAs). The Southern African Customs Union (SACU) is negotiating an FTA with the United States. South Africa, the largest African economy, has already signed an FTA with the EU.2

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

The generally disappointing record of African RTAs warrants a reexamination of the underlying assumptions. Is the record disappointing because no preconditions were established to make the RTAs beneficial, dooming them to failure before they even began? Or is this record the result of poor design and/or implementation? What can we learn from the successes of regional trade integration in other parts of the world as well as from Africa’s failures?

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

Time-series data show that the impact of the RTAs on intra-African trade seems to have been small or insignificant. As a share of the continent’s global trade, intra-African trade declined over much of the 1970s before it recovered in the 1980s and the first half of the 1990s. It was not until the early 1990s that intra-African trade recovered to its early 1970s levels (Figure 2). Since the mid-1990s, however, it has stagnated at about 10 percent of total African trade despite intensified efforts to integrate regionally. Trade among the countries in the major RTAs (SADC, COMESA, ECOWAS, WAEMU, and CEMAC) has also grown erratically relative to their trade with the rest of the world, often showing no obvious trend over time—except perhaps WAEMU, whose intraregional trade has increased in recent years because of the improved performance of the CU (Table 3). For many RTAs, intra-arrangement trade as a share of their total external trade remains below intra-African trade as a share of total African external trade.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

Over the past decades, African countries have set ambitious goals for their regional trade arrangements, but the results have so far fallen short of expectations. Most African RTAs started with a low level of intraregional trade. Thus, even if the RTAs had been more successfully implemented, the impact of these arrangements on Africa’s overall trade would have been small—unless they had created a more favorable environment for overall trade. The potential of the RTAs in exploiting economies of scale and enhancing competition has been limited by the lack of trade complementarity among RTA partners, small market size, poor transport infrastructure, and high trading costs at the border. More important, relatively high barriers against trade with the rest of the world have essentially turned RTAs into an import substitution policy at the regional and subregional levels.

Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

Over the past 25 years, Mauritius’s public finances have experienced three distinct phases: large fiscal deficits in the early 1980s, followed by a period of fiscal consolidation and discipline during the late 1980s and early 1990s, and finally the reemergence of fiscal imbalances from the second half of the 1990s to date (see Table 6.1).

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

Oil-exporting countries have used a variety of exchange rate arrangements, as shown in Figure 9. At the end of 2001, about 18 of the 29 oil-producing IMF member countries (excluding the former Soviet bloc countries) used some form of fixed exchange rate regime, while 11 opted for either managed or independent floating. This suggests that, in practice, the choice of an exchange rate arrangement is not a straightforward exercise; instead, exchange rate policy has to be based on country-specific considerations, including the relative openness of the economy, in terms of both current and capital accounts, and the relative prevalence of real or nominal shocks. Exchange rate policy will also have to take into account the monetary policy and institutional framework in which it is set.18 This subsection describes first general considerations, then potential advantages of flexible exchange rates, and finally policies in support of fixed exchange rates.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

Transparency and accountability in oil sector operations are necessary to improve governance in oil-producing countries. The same transparency and accountability guidelines that apply to non-oil revenue should apply to oil revenue. Oil revenue is part of government budgetary operations, and it is of overwhelming importance in the countries we are dealing with in this paper. The IMF’s Manual on Fiscal Transparency (IMF, 2001) states that comprehensive coverage of all fiscal activity undertaken by the central government is essential from a transparency standpoint. In some cases, the coverage should extend beyond the government itself: the public sector balance should be reported when nongovernmental public sector agencies undertake significant quasi-fiscal activities. The public should accordingly be provided with full information on the past, current, and projected fiscal activity of the government.