A major portion of sub-Saharan Africa’s foreign exchange earnings are devoted to the procurement of petroleum. This situation could be ameliorated: a revamping of policies and practices in hydrocarbons procurement and distribution could yield savings in the region of an amount significantly greater than yearly net disbursements of World Bank loans and credits to all the continent combined.
Over many years rises and fall of world oil prices have been repeatedly reflected in the boom-bust cycles in oil-exporting countries the world over. The recent spectacular rise and equally spectacular fall in prices provides an opportunity to inquire whether anything is different this time. In this paper we limit the analysis to the experience, outlook, and longterm fiscal policy considerations for eight of the world's oil-producing countries in sub- Saharan Africa. Because we are interested in gauging their fiscal vulnerability and sustainability from the angle of managing exhaustible oil wealth, we focus on the non-oil primary balance as the relevant indicator of how initial conditions and resource endowments can influence long-term considerations in several different models of fiscal rules.
In the extensive empirical work carried out across the IMF on oil-producing sub-Saharan African (SSA) countries, the notion of "sustainability" is often directed toward fiscal policies, and, in particular, views on the "optimal" non-oil primary fiscal deficit. The bulk of this work does not, however, address external sustainability, which is a concern especially for those SSA oil producers operating under a fixed exchange rate regime. A couple of recent papers have extended the existing methodologies to assess external sustainability for some oil-producing countries but they do not focus on those in sub-Saharan Africa. In this paper, we bolster this empirical work by providing a range of estimates for the long-run external current external account balance for each of the SSA oil-producing countries, based on three widely used methodologies in the IMF. Our research strategy is to apply these models to the eight countries in the subregion - Angola, Cameroon, Chad, Côte d'Ivoire, Equatorial Guinea, Gabon, Nigeria, and the Republic of Congo - using similar simplifying assumptions so that we are using the same lens to view how they do and do not differ.
Manoj Atolia, Bin Grace Li, Ricardo Marto, and Mr. Giovanni Melina
Why do governments in developing economies invest in roads and not enough in schools? In the presence
of distortionary taxation and debt aversion, the different pace at which roads and schools contribute to
economic growth turns out to be central to this decision. Specifically, while costs are front-loaded for both
types of investment, the growth benefits of schools accrue with a delay. To put things in perspective, with
a “big push,” even assuming a large (15 percent) return differential in favor of schools, the government
would still limit the fraction of the investment scale-up going to schools to about a half. Besides debt
aversion, political myopia also turns out to be a crucial determinant of public investment composition. A
“big push,” by accelerating growth outcomes, mitigates myopia—but at the expense of greater risks to
fiscal and debt sustainability. Tied concessional financing and grants can potentially mitigate the adverse
effects of both debt aversion and political myopia.
The September 2007 issue of F&D looks at the growth of cities and the trend toward urbanization. Within the next year, for the first time in history, more than 50 percent of the world's population will be living in urban rather than rural areas. What are the economic implications of this urban revolution? Economists generally agree that urbanization, if handled well, holds great promise for higher growth and a better quality of life. But as the lead article tells us, the flip side is also true: if handled poorly, urbanization could not only impede development but also give rise to slums. Other articles in this series look at poverty as an urban phenomenon in the developing world and the development of megacities and what this means for governance, funding, and the provision of services. Another group of articles discusses the challenge of rebalancing growth in China. 'People in Economics' profiles Harvard economist Robert Barro; 'Country Focus' looks at the challenges facing Mexico, and 'Back to Basics' takes a look at real exchange rates.