This paper demonstrates that the Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy the aid-induced increased demand. Diagnoses on, and prognoses for, the Dutch disease should take into account country-specific circumstances to avoid ill-advised policies. The paper emphasizes that using public resources inefficiently can be more painful than real exchange rate appreciations, which may not necessarily embody the Dutch disease.
The global boom in hydrocarbon, metal and mineral prices since the year 2000 created huge
economic rents - rents which, once invested, were widely expected to promote productivity
growth in other parts of the booming economies, creating a lasting legacy of the boom years.
This paper asks whether this has happened. To properly address this question the empirical
strategy must look behind the veil of the booming sector because that, by definition, will
boom in a boom. So the paper considers new data on GDP per person outside of the resource
sector. Despite having vast sums to invest, GDP growth per-capita outside of the booming
sectors appears on average to have been no faster during the boom years than before. The
paper finds no country in which (non-resource) growth per-person has been statisticallysignificantly
higher during the boom years. In some Gulf states, oil rents have financed a
migration-facilitated economic expansion with small or negative productivity gains. Overall,
there is little evidence the booms have left behind the anticipated productivity transformation
in the domestic economies. It appears that current policies are, overall, prooving insufficient
to spur lasting development outside resource intensive sectors.
Mr. Peter S. Heller, Mr. Erik Lueth, Mr. Michael W. Bell, and Jennifer Bisping
There is a consensus in the international community that more resources are needed to help low-income countries battle HIV/AIDS. The IMF has welcomed this emerging commitment by donors and is working with recipient countries to make the best possible use of the new resources.