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Prepared by Janet Stotsky. This study draws upon some initial work done on this topic by Vincent Hogan.
This figure excludes payments of dividends from state-owned natural resource companies to the budget.
Fiscal instruments differ in the degree to which revenues vary as a result of changes in the price of the resource and other market perturbations.
An average is used to remove the influence of year-to-year fluctuations in these ratios owing to changes in the price of oil, changes in the tax law, and other factors.
A comparison to other oil producers was limited by the availability of comparable data.
In all these countries, for comparability, tax revenues do not include payments of dividends from state-owned enterprises operating in the energy area.
The government controls the pace of development indirectly through granting rights to private producers to explore and develop resources and through the tax and regulatory system it establishes.
This formulation ignores the government’s existing nonpetroleum assets. These assets would mainly comprise the government’s equity share in state enterprises, some buildings, and some financial assets. Existing debts are netted out of the measure of petroleum wealth.
In reality, the government is limited in its ability to generate revenue from energy resources by the production levels chosen by the private sector. However, if it is assumed that the government could borrow against future revenues, then the production constraint should not unduly constrain fiscal decisions.
This share reflects the fiscal regimes that apply to oil and gas production. In principle, it would be desirable to use a “representative” share, but given frequent changes in the price of petroleum and in the fiscal regimes, it would be difficult to denote any year as necessarily representative. The ratio used in these simulations is derived from an examination of total revenues from petroleum as a share of output in the industry over the period 1994-97, which yields the average ratio of 21 percent.
The price assumptions are based on WEO estimates.
Since prices for petroleum are currently relatively low and they are assumed to remain constant in real terms, this assumption places a relatively low value on petroleum assets.
This figure is between the historical returns on stocks and bonds in the U.S. during this century.
These rates are approximate for 1998 and are projected to continue through the period of the simulation.
The current balance includes only current expenditures and current revenues. It does not include capital expenditures or privatization revenues in the measure of the deficit.