Gabon: Selected Issues and Statistical Appendix

International Monetary Fund

doi:10.5089/9781451813883.002.A003

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Gabon: Selected Issues and Statistical Appendix

Author: International Monetary Fund

Publication Date:: 03 May 2002

eISBN:: 9781451813883

Language:: English

Keywords:: ISCR; CR; financing; oil revenue; oil GDP; FFG position; interest rate; GDP growth; Oil; gas and mining taxes; Fiscal stance; Fiscal sustainability

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This Selected Issues paper and Statistical Appendix for Gabon discusses fiscal and development issues with a focus on problems caused by Gabon’s high dependence on oil, with large oil price-related fluctuations in government revenue and rapidly declining oil production since its peak in 1997. The paper addresses the issue of fiscal and debt sustainability with several existing methodologies, adapted to Gabon’s situation of high and declining oil revenue. The fiscal and debt sustainability analysis also takes into account the expected decline in future oil resources.

Abstract

III. Analysis of Fiscal and Debt Sustainability¹²

A. Background

22. As Gabon is a member of the CFA monetary zone, fiscal deficits have had no significant direct impact on inflation and the exchange rate, owing to the fixed exchange rate and the cointegration of prices in CFA countries and prices in France (Odedokun, 1997; and Nuven, 1994). However, these deficits have led to high levels of indebtedness, which have become costly to the budget. The external debt burden became so high that Gabon had to resort to six debt reschedulings from Paris Club creditors during 1987–2000. Despite these reschedulings, the external debt service has remained high, thereby reducing the resources available for the development of basic economic and social infrastructure, which are necessary for long-term development (Gerson, 1998).

23. The fiscal deficits recorded in the early 1970s, most of the 1980s, and the early 1990s were financed by recourse to external and domestic borrowing. The debt-to-GDP ratio increased from around 30 percent in the early 1970s to around 100 percent during 1995-99. Reflecting mainly stepped-up repayments, the debt ratio has since then been on a declining trend and was slightly below 70 percent of GDP at end-2001. While external debt has represented the bulk of public debt, domestic debt became important during the 1990s, averaging over 20 percent of total debt in the second half of that decade. However, with the improvement in the government’s fiscal position, the domestic debt was reduced to below 15 percent of GDP at end-2001. Foreign borrowing was contracted essentially at unfavorable commercial conditions, including high interest rates of 7 to 12 percent during 1991–2001 (Table III.1)¹³ and short maturities (less than ten years).¹⁴ As a result, the external debt service constitutes a heavy burden for Gabon’s development, currently representing 13½ percent of GDP and consuming 40 percent of government revenue. The servicing of external debt has necessitated significant fiscal adjustment and the maintenance of large primary surpluses. Domestic borrowing included bank financing and the accumulation of payments arrears.^15, ¹⁶

Table III 1.

Gabon: Analysis of Fiscal and Debt Sustainability, 1991–2001

(In percent of GDP, unless otherwise indicated)

Sources: Gabonese authorities; and staff estimates and projections.

^{^1/}Interest payments due in t divided by stock of debt at the end of t-1.

^{^2/}b^* is the sustainable primary balance (allowing the stabilization of the debt ratio at d_t-1), (b^*-b) and (b^*-b3) the short- and medium-term primary gaps.

Table III 1.

Gabon: Analysis of Fiscal and Debt Sustainability, 1991–2001

(In percent of GDP, unless otherwise indicated)

	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
Debt-to-GDP ratio at the end of t-1 (d_t-1)	60.3	67.2	67.5	80.1	123.7	112.4	86.5	83.9	99.2	101.0	72.3
Primary balance (b)	3.6	1.0	1.0	4.7	11.3	8.6	7.8	−6.3	8.1	17.7	16.5
Primary balance, three-year average ahead (b3)	1.9	2.3	5.7	8.2	9.3	3.4	3.2	6.5	14.1	14.7	12.2
Implicit interest rate (r) in percent ^1/	9.4	9.2	10.7	12.7	7.3	6.5	7.6	7.7	7.5	7.4	11.7
Nominal GDP growth (g), in percent	−5.9	−2.9	3.4	52.0	6.4	17.7	6.7	−14.9	7.4	26.0	−5.3
Estimated primary balance and growth gaps ^2/
b^*	9.8	8.4	4.8	−20.7	1.1	−10.7	0.7	22.3	0.1	−14.9	13.0
b^-b*	6.2	7.3	3.7	−25.4	−10.2	−19.3	−7.1	28.7	−8.0	−32.6	−3.5
b^-b3*	8.0	6.1	−0.9	−28.9	−8.1	−14.0	−2.5	15.9	−14.0	−29.6	0.8

Sources: Gabonese authorities; and staff estimates and projections.

^{^1/}Interest payments due in t divided by stock of debt at the end of t-1.

^{^2/}b^* is the sustainable primary balance (allowing the stabilization of the debt ratio at d_t-1), (b^*-b) and (b^*-b3) the short- and medium-term primary gaps.

Table III 1.

Gabon: Analysis of Fiscal and Debt Sustainability, 1991–2001

(In percent of GDP, unless otherwise indicated)

	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
Debt-to-GDP ratio at the end of t-1 (d_t-1)	60.3	67.2	67.5	80.1	123.7	112.4	86.5	83.9	99.2	101.0	72.3
Primary balance (b)	3.6	1.0	1.0	4.7	11.3	8.6	7.8	−6.3	8.1	17.7	16.5
Primary balance, three-year average ahead (b3)	1.9	2.3	5.7	8.2	9.3	3.4	3.2	6.5	14.1	14.7	12.2
Implicit interest rate (r) in percent ^1/	9.4	9.2	10.7	12.7	7.3	6.5	7.6	7.7	7.5	7.4	11.7
Nominal GDP growth (g), in percent	−5.9	−2.9	3.4	52.0	6.4	17.7	6.7	−14.9	7.4	26.0	−5.3
Estimated primary balance and growth gaps ^2/
b^*	9.8	8.4	4.8	−20.7	1.1	−10.7	0.7	22.3	0.1	−14.9	13.0
b^-b*	6.2	7.3	3.7	−25.4	−10.2	−19.3	−7.1	28.7	−8.0	−32.6	−3.5
b^-b3*	8.0	6.1	−0.9	−28.9	−8.1	−14.0	−2.5	15.9	−14.0	−29.6	0.8

Sources: Gabonese authorities; and staff estimates and projections.

^{^1/}Interest payments due in t divided by stock of debt at the end of t-1.

^{^2/}b^* is the sustainable primary balance (allowing the stabilization of the debt ratio at d_t-1), (b^*-b) and (b^*-b3) the short- and medium-term primary gaps.

B. Conceptual Framework for Debt and Fiscal Sustainability

24. The analysis of fiscal sustainability determines whether the government can pursue indefinitely a given set of fiscal policies without future policy reversals (Zee, 1998; and Horne, 1991). In particular, fiscal policy is sustainable if it leads to a steady state debt-to-GDP ratio.¹⁷ The current analysis uses indicators of fiscal sustainability developed by Blanchard, Chouraqui, Hagemann, and Sartor (1990) in the context of OECD countries and builds on the debt dynamics developed by Buiter (1997):

\begin{matrix} Δ D_{t} = I_{t} - B_{t} & (1) \end{matrix}

I_{t} = r D_{t - 1},

where ΔD is the change in government debt (D_t - D_t-1), I_t the interest payments, B_t the primary balance, and r the nominal interest rate.

25. Equation (1) indicates that government fiscal deficits are financed by the contracting of new debt; the stock of debt is reduced when primary surpluses exceed interest payments. By dividing both sides of the equation by GDP (Y_t = (1+g)Y_t−1), where g is the nominal GDP growth rate, and after rearranging, equation (1) leads to the following dynamic equation:

\begin{matrix} Δ d_{t} = (r - g) d_{t - 1} / (1 + g) - b_{t,} & (2) \end{matrix}

Solving forward this first-difference equation leads to the intertemporal budget constraint that the stock of debt has to be equal to the present discounted value of future primary fiscal balances:

\begin{matrix} d_{t} = - Σ_{j = 1}^{\infty} γ^{- j} b_{t + j} & γ = (1 + r) / (1 + g) and γ - 1 = (r - g) / (1 + g) . & (3) \end{matrix}

26. Failure to meet this constraint will result either in a profound change in fiscal policy or a debt repudiation, high inflation, and exchange rate depreciation, therefore suggesting that the current fiscal policies are not sustainable.

27. One indicator of fiscal sustainability is provided by the comparison of the actual primary balance with a theoretical sustainable primary balance (b^*) that would stabilize the ratio of debt to GDP at d_t-1 or Δd_t=0:

\begin{matrix} b^{*} = d_{t - 1} (r - g) / (1 + g) = d_{t - 1} (γ - 1) & (4) \end{matrix}

\begin{matrix} b^{*} - b_{t} = d_{t - 1} (r - g) / (1 + g) - b_{t} . & (5) \end{matrix}

Equation (4) shows that, when nominal growth is higher than the interest rate, the stock of debt could be stabilized while incurring primary deficits (b^* <0). Otherwise, primary surpluses would be needed to stabilize the debt-to-GDP ratio at the current level (d_t-1). Equation (5) gives the magnitude of the fiscal adjustment that would be required to stabilize the debt-to-GDP ratio. If this effort is not secured, the country’s debt-to-GDP ratio would continue to increase above the current level at a rate equal to b^*−b_t = Δd_t.

28. A positive primary balance gap indicates the fiscal effort needed to stabilize the debt stock and to honor government’s debt obligations. A negative value indicates a budgetary margin. It should be noted that stabilizing the debt-to-GDP ratio at the existing level does not imply that the current level is desirable.

C. Gabon’s Fiscal Performance, 1991–2001

29. The above framework is applied to Gabon for the 1991–2001 period. It indicates that Gabon has made progress towards fiscal sustainability since 1994, although the medium-term financial outlook remains difficult (Table III.1 and Figure III.1). Primary balance gaps, which are positive during 1991–93 become negative during most of the period after 1994, implying significant margins that have allowed Gabon to reduce its debt-to-GDP ratio. However, the positive gap in 1998 is indicative of the fragility of Gabon’s fiscal adjustment. To dampen cyclical effects and estimate the fiscal adjustment required over the medium term, medium-term gaps (b^*-b₃) were constructed using three-year forward averages for the primary balance (b₃), based on the primary balances for the current year and the following two years. This indicator broadly confirms the finding using short-term primary gaps.

D. Achieving a Normative Debt-to-GDP Ratio

30. As noted above, the analysis of fiscal sustainability based on the stabilization of the existing debt-to-GDP ratio is limited by the fact that it does not necessarily imply that the debt-to-GDP ratio would be stabilized at an optimal or desirable level. A lower debt-to-GDP ratio may be justified by the need to lower interest payments, to improve the government’s credibility relative to the private sector, and to reduce the debt-service burden, so as to provide room for maneuver with regard to future fiscal policy. In particular, the prospects for lower oil revenue in the case of Gabon would call for a reduction in the debt-to-GDP ratio to a level consistent with the prospects for non-oil revenue. To reduce the debt-to-GDP ratio to a desirable level in year n (d_n), significant incremental primary surpluses will have to be generated each year until year n. Only when the desirable debt-to-GDP ratio has been reached, can the analysis developed above be applied. Expanding equation (2) to get d_n = γⁿd₀ − b(1 + γ + γ² + … + γⁿ⁻¹), where d₀ is the initial debt-to-GDP ratio, one obtains the primary surplus (b) required every year to reduce the debt-to-GDP ratio from d₀ to d_n after n years:

\begin{matrix} \underline{b} = (γ^{n} d_{o} - d_{n}) (γ - 1) (γ^{n} - 1), & where γ = (1 + r) / (1 + g) and γ - 1 = (r - g) / (1 + g) & (6 a) \end{matrix}

\begin{matrix} \underline{b} = d_{n} \underset{(\overset{︷}{1})}{(γ - 1)} + (d_{0} - d_{n}) \underset{(\overset{︷}{2})}{(γ - 1)} [γ^{n} / (γ^{n} - 1)] & (6 b) \end{matrix}

where the first term in (6b) is the primary balance required to stabilize the debt-to-GDP ratio at the desirable level d_n and the second term in (6b) is the incremental fiscal effort required to reduce the debt-to-GDP ratio from d₀ to d_n in n years.¹⁸

31. The table below shows (i) the primary surpluses required to reduce the debt-to-GDP ratio from 70 percent to various desired levels in three years; and (ii) the primary balance needed to stabilize the debt-to-GDP ratio once the the desirable level has been reached.¹⁹ For example, with an interest rate of 4 percent and a GDP growth rate of 2 percent, a primary surplus of about 11 percent of GDP would be required every year to reduce the debt-to-GDP ratio from 70 percent to 40 percent over a three-year period.²⁰ Maintaining this level thereafter would require a primary surplus of about 1 percent of GDP every year.

Primary Balance Needed to Achieve and Maintain a Normative Debt-to-GDP Ratio

(In percent of GDP, from an initial level of 70 percent of GDP)

Primary Balance Needed to Achieve and Maintain a Normative Debt-to-GDP Ratio

(In percent of GDP, from an initial level of 70 percent of GDP)

		Normative Debt to GDP Ratio (d_n) to be
		Achieved in Three Years
		70	60	50	40	30	20
Interest rate=4 percent; nominal GDP growth=6 percent
	Primary balance needed to achieve d_n (b)	−1.3	2.1	5.5	8.9	12.3	15.7
	Primary balance needed to maintain d_n (b_n^)*	−1.3	−1.1	−0.9	−0.8	−0.6	−0.4
Interest rate=4 percent; nominal GDP growth=2 percent
	Primary balance needed to achieve d_n (b)	1.4	4.6	7.9	11.2	14.4	17.7
	Primary balance needed to maintain d_n (b_n^)*	1.4	1.2	1.0	0.8	0.6	0.4

Primary Balance Needed to Achieve and Maintain a Normative Debt-to-GDP Ratio

(In percent of GDP, from an initial level of 70 percent of GDP)

		Normative Debt to GDP Ratio (d_n) to be
		Achieved in Three Years
		70	60	50	40	30	20
Interest rate=4 percent; nominal GDP growth=6 percent
	Primary balance needed to achieve d_n (b)	−1.3	2.1	5.5	8.9	12.3	15.7
	Primary balance needed to maintain d_n (b_n^)*	−1.3	−1.1	−0.9	−0.8	−0.6	−0.4
Interest rate=4 percent; nominal GDP growth=2 percent
	Primary balance needed to achieve d_n (b)	1.4	4.6	7.9	11.2	14.4	17.7
	Primary balance needed to maintain d_n (b_n^)*	1.4	1.2	1.0	0.8	0.6	0.4

32. The next subsection addresses the issue of how to determine the desirable debt-to-GDP ratio and sustainable primary balances in the face of the expected decline in oil revenue.

E. Fiscal Sustainability in the Face of Exhaustible Resources

Introduction

33. As indicated above, the traditional sustainability analysis has several limitations. First, maintaining the debt-to-GDP ratio unchanged does not address a country’s existing heavy debt burden and the level of the desirable debt-to-GDP ratio is undetermined. Second, for countries like Gabon, where the government budget is dominated by oil revenue, there is a need to take into account the expected stream of oil revenue over time. In this regard, it is essential to consider the income derived from oil not as the accrual of revenue, but as a reduction in wealth associated with an exhaustible resource. This is particularly important for Gabon for which oil production is projected to be reduced by one-half over the next few years.²¹ The intertemporal government budget constraint given by equation (3) and the sustainable primary balance of equation (4) may be misleading in such a case, since the underlying level of government fiscal deficits and net indebtedness is underestimated (Alier and Kaufman, 1999). In fact, such a framework assumes that revenue, including oil revenue, would be collected indefinitely, despite the finite horizon for the exploitation of oil resources. There are two ways to safeguard the oil wealth, either by not exploiting the resource or by investing the value of oil production and consuming only all or part of the associated investment income. The decision would depend on future oil prices and the interest rates on the investment of oil savings.²² In particular, oil exploitation when prospective oil price increases are lower than the return on placement, would be more rapid, but oil revenue would need to be largely set aside to generate financial wealth to be used after the depletion of oil reserves.²³

34. A forward-looking approach is needed to ensure that the government is not forced to revise its policies, at the expense of future generations, when the oil wealth is exhausted.²⁴ Fiscal policy should aim at intergenerational equity, by setting aside part of oil revenue in earlier years to be shared with future generations when oil resources will be much lower. Furthermore, spreading over time the spending of foreign exchange earnings from oil would lead to a smoother path for the real exchange rate, as the depreciation eventually required when oil reserves are exhausted would start early on as financial reserves in foreign exchange are built.²⁵ The problem at hand is, therefore, to find a sustainable path for the non-oil fiscal balance where deficits in later years can be financed by part of the oil revenue set aside in early years.²⁶

35. It can be argued that investment in infrastructure, health, and education in the context of a growth and poverty reduction strategy could help generate higher growth in the non-oil sector and adequate non-oil revenue for future generations. A delicate balance will therefore have to be struck between the current investment needs and the constitution of savings for future generations. This balance will depend on a number of variables, including the time preference of the current generation,²⁷ the information on the volume of oil reserves and the period remaining until exhaustion, the return on financial investments versus the cost of borrowing, and the capacity of the current generation to use effectively the income from oil resources.

Framework for fiscal sustainability and intergenerational equity

36. The framework below derives the path for oil and non-oil wealth and the associated non-oil primary balances, while attempting to illustrate the choices faced by the government in the management of oil resources and its non-oil debt:

\begin{matrix} W_{t + 1} = A_{t + 1} + F F G_{t + 1} + V_{0_{t + 1}} & (7 a) \end{matrix}

\begin{matrix} A_{t + 1} = A_{t} (1 + r) + F_{t + 1} + Y_{0_{t + 1}} . & (7 b) \end{matrix}

\begin{matrix} F F G_{t + 1} = F F G_{t} (1 + p) + T_{0_{t + 1,}} - Y_{0_{t + 1}}, & (7 c) \end{matrix}

where A is the non-oil debt (A<0), F the non-oil primary balance, T₀ the oil revenue, Y₀ the transfer of oil-based revenue (direct budgetary allocations of oil revenue or transfer from the oil savings fund or Fund for Future Generations, FFG), ρ the return on FFG resources, and V₀ the discounted future oil revenue, or a measure of the oil wealth.

37. Oil wealth and oil revenue. To estimate oil wealth, it is assumed that annual oil production (O_t) changes at a constant rate (e<0, i.e., a decline), the tax rate τ on oil resources is constant, and a parameter λ determines the annual rate of change in world oil prices (P_t). Under these conditions, oil revenue and oil wealth in current year t and beyond are, respectively:

\begin{matrix} T_{0_{t + j}} \underset{= T_{o_{t}} {(1 + λ)}^{j} {(1 + e)}^{j}}{= τ P_{t} O_{t} {(1 + λ)}^{j} {(1 + e)}^{j}} & (8 a) \end{matrix}

\begin{matrix} V_{0_{t}} \underset{= T_{0_{t}} (1 + r) / (r - e - λ - e λ)}{= τ P_{t} O_{t} (\sum_{j = 0}^{\infty} {[(1 + λ) (1 + e) / (1 + r)]}^{j})} & (8 b) \end{matrix}

V_{0_{t + j}} = V_{0_{t}} {(1 + λ)}^{j} {(1 + e)}^{j},

where To_t = τP_tO_t is the oil revenue in period t.²⁸ From relations (8a) and (8b), oil revenue in period t+j also equals to

\begin{matrix} T_{0_{t + j}} = V_{0_{t}} [(r - e - λ - e λ) / (1 + r)] {(1 + λ)}^{j} {(1 + e)}^{j} & (8 c) \end{matrix}

38. Transfer to the budget of oil-based income. These transfers are either direct budgetary oil revenue or income from the FFG. It is assumed that the oil wealth, Vo_t, is distributed equitably across generations through equal income transfers per capita (y^*):

\begin{matrix} V_{0_{t}} = Y * N \sum_{j = 0}^{\infty} {[(1 + η) / (1 + r)]}^{j} = Y * N (1 + r) / (r - η) & (9 a) \end{matrix}

\begin{matrix} y * = V_{0_{t}} (r - η) / N (1 + r) & (9 b) \end{matrix}

\begin{matrix} Y_{0_{t}} * = N_{y *} = V_{0_{t}} (r - η) / (1 + r) & (9 c) \end{matrix}

\begin{matrix} Y_{0 *_{t + j}} = N_{t + j} y * = V_{0_{t}} [(r - η) / (1 + r)] (1 + η)^{j}, & (9 d) \end{matrix}

where η is the population growth. For simplicity, assuming that non-oil GDP growth equals to population growth (η=g), relation (9d) can be expressed in terms of non-oil GDP as follows:

\begin{matrix} y_{0} *_{t + j} = v_{0_{t}} (r - g) / (1 + r), & (9 e) \end{matrix}

underlying the idea that oil-based transfers will be constant in terms of non-oil GDP.

39. Fund for Future Generations. The FFG is fed by the net amount of oil revenue and transfers to the budget, in addition to earnings on the stock. Using equations (7c), (8c) and (9e), the path for the FFG is as follows:

\begin{matrix} F F G_{t + j} = F F G_{t + j - 1} (1 + ρ) + V_{0_{t}} [(r - e - λ - e λ) / (1 + r)] {(1 + λ)}^{j} {(1 + e)}^{j} - V_{0_{t}} [(r - g) / (1 + r)] {(1 + g)}^{j} . & (10 a) \end{matrix}

As a ratio of non-oil GDP, the position of the Fund for Future Generations evolves according to the following path:

\begin{matrix} f f g_{t + j} = v_{0_{t}} [(r - g) / (1 + r)] [(1 + ρ) / (ρ - g)] + v_{0_{t}} ζ (j) / {(1 + g)}^{j} & (10 b) \end{matrix}

\begin{matrix} \underset{j \to \infty}{Lim} f f g_{t + j} = v_{0_{t}} [(r - g) / (1 + r)] [(1 + ρ) / (ρ - g)] & (10 c) \end{matrix}

\begin{matrix} \begin{matrix} = v_{0_{t}} & w h e n r = ρ \end{matrix} & (10 d) \end{matrix}

where $ν 0_{t}$ is the oil wealth-to-GDP ratio, while ζ(j) is the deviation relative to the long-term path given by equations (10c) and (l0d). These equations show that the position of the oil fund relative to non-oil GDP will tend to reproduce the oil wealth in the base year (vo_t).

40. Non-oil debt. For the dynamics of the debt and the net financial position excluding oil-based wealth, we turn to the earlier fiscal sustainability analysis (equations 6a-b), replacing the primary balance b by the non-oil primary balance F plus the transfers of the oil-based income to the budget $({Yo}_{t}^{*})$ . A target for the debt-to-non-oil GDP ratio (a_t+n) to be reached in year t+n is also assumed:

\begin{matrix} \underline{b} = f + y_{0_{t}} * = a_{t + n} (γ - 1) + (a_{t} - a_{t + n}) (γ - 1) [γ^{n} / (γ^{n} - 1)] & (11) \end{matrix}

with f and ${yo}_{t}^{*}$ representing F and ${Yo}_{t}^{*}$ expressed in terms of the non-oil GDP.

41. The first term in (11) is the overall primary balance (including oil-based transfers, i.e., direct oil revenue and transfers from the FFG) required to stabilize the debt-to-non-oil GDP ratio at the desirable level a_t+n, while the second term is the incremental fiscal effort to get to that level in n years. The non-oil primary balance (f, likely a deficit) is determined residually once the political choices about sustainable and intergenerationally equitable oil transfers $({yo}_{t}^{*})$ and the desirable debt-to-non-oil GDP ratio have been made.

Application to Gabon

42. Fiscal prospects with no policy change. Gabon’s current non-oil financial position is negative and consists mainly of the domestic and external debt, representing about 120 percent of non-oil GDP at end-2001 (about 70 percent of GDP).²⁹ During 2001-23, oil production is projected to decline on average by 10 percent annually (e = −0.10), and existing oil reserves are assumed to be virtually depleted by 2023.³⁰ Non-oil GDP growth (g) is projected at 5 percent.³¹ Oil prices are assumed to remain at their level of 2001 (US$24.3 per barrel, or λ=0), above the average price recorded during 1979–2001 (US$22.2 per barrel), as well as above current WEO medium-term projections (around US$20 per barrel).³² Assuming a long-term market interest rate (r) of 4 percent, the oil wealth Vo_t (or discounted oil revenue) is estimated at 289 percent of non-oil GDP (some 165 percent of GDP) at end-2001, and is projected to decline continuously in the future and to disappear after year 2023 following the virtual exhaustion of oil reserves. The total net wealth position at end-2001 is estimated at about 168 percent of non-oil GDP (Table III.2).

Table III.2.

Gabon: Analysis of Fiscal and Debt Sustainability, 2001–30^1/

(In percent of non-oil GDP, unless otherwise indicated)

Source: Staff estimates and projections.

^{^1/}FFG stands for Fund for Future Generations. Each year, 10 percent of oil revenue is allocated to the Fund and invested at a rate of 4 percent.

Table III.2.

Gabon: Analysis of Fiscal and Debt Sustainability, 2001–30^1/

(In percent of non-oil GDP, unless otherwise indicated)

		2001	2005	2010	2015	2020	2023	2025	2030
Number of years of additional oil production		0.0	4.0	9.0	14.0	19.0	22.0	0.0	0.0
Non-oil GDP in billions of CFA francs		1,937.4	2,354.9	3,005.5	3,835.9	4,895.7	5,667.3	6,248.2	7,974.5
Oil production, in million tons		13.0	8.5	5.0	3.0	1.8	1.3	0.0	0.0
Debt, with no policy change		−121.1	−52.3	−37.5	−60.4	−99.3	−125.9	−146.4	−195.9
Non-oil primary balance (f)		−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5
Oil revenue		40.3	21.8	10.1	4.7	2.2	1.4	0.0	0.0
Overall primary balance		28.8	10.3	−1.4	−6.8	−9.3	−10.1	−11.5	−11.5
Market nominal interest rate ((r) in percent)		4.0
Nominal non-oil GDP growth (g), in percent
Nominal non-oil GDP growth ((g) in percent)		5.0
Number of years before oil reserve depletion		22.0	18.0	13.0	8.0	3.0	0.0	0.0	0.0
Oil price changes (in percent)		0.0
Oil production growth (in percent)		−10.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
Total asset (without policy change)		167.8	178.4	130.1	49.7	−47.2	−112.1	−146.4	−195.9
With the Constitution of the FFG^1/
Non-oil primary balance (in percent)		−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5
Overall primary balance, excluding the FFG		28.8	8.1	−2.4	−7.3	−9.6	−10.3	−11.5	−11.5
Oil revenue		40.3	21.8	10.1	4.7	2.2	1.4	0.0	0.0
	Annual allocation to the budget	40.3	19.6	9.1	4.2	1.9	1.2	0.0	0.0
	Annual allocation to the FFG	0.0	2.2	1.0	0.5	0.2	0.1	0.0	0.0
FFG position		0.0	11.0	17.3	19.7	20.2	20.1	19.8	18.8
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
Total assets		167.8	178.4	130.1	49.7	−47.2	−112.1	−146.4	−195.9
Sensitivity to the FFG return
FFG return		2.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	10.6	15.7	16.7	15.8	15.0	14.1	12.2
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	178.1	128.5	46.7	−51.6	−117.3	−152.0	−202.5
FFG return		6.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	11.3	19.0	23.3	26.0	27.2	27.7	29.0
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	178.8	131.8	53.3	−41.5	−105.1	−138.4	−185.7
FFG return		8.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	11.7	20.9	27.6	33.4	36.8	38.9	44.8
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	179.1	133.7	57.6	−34.1	−95.4	−127.2	−169.9

Source: Staff estimates and projections.

^{^1/}FFG stands for Fund for Future Generations. Each year, 10 percent of oil revenue is allocated to the Fund and invested at a rate of 4 percent.

Table III.2.

Gabon: Analysis of Fiscal and Debt Sustainability, 2001–30^1/

(In percent of non-oil GDP, unless otherwise indicated)

		2001	2005	2010	2015	2020	2023	2025	2030
Number of years of additional oil production		0.0	4.0	9.0	14.0	19.0	22.0	0.0	0.0
Non-oil GDP in billions of CFA francs		1,937.4	2,354.9	3,005.5	3,835.9	4,895.7	5,667.3	6,248.2	7,974.5
Oil production, in million tons		13.0	8.5	5.0	3.0	1.8	1.3	0.0	0.0
Debt, with no policy change		−121.1	−52.3	−37.5	−60.4	−99.3	−125.9	−146.4	−195.9
Non-oil primary balance (f)		−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5
Oil revenue		40.3	21.8	10.1	4.7	2.2	1.4	0.0	0.0
Overall primary balance		28.8	10.3	−1.4	−6.8	−9.3	−10.1	−11.5	−11.5
Market nominal interest rate ((r) in percent)		4.0
Nominal non-oil GDP growth (g), in percent
Nominal non-oil GDP growth ((g) in percent)		5.0
Number of years before oil reserve depletion		22.0	18.0	13.0	8.0	3.0	0.0	0.0	0.0
Oil price changes (in percent)		0.0
Oil production growth (in percent)		−10.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
Total asset (without policy change)		167.8	178.4	130.1	49.7	−47.2	−112.1	−146.4	−195.9
With the Constitution of the FFG^1/
Non-oil primary balance (in percent)		−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5	−11.5
Overall primary balance, excluding the FFG		28.8	8.1	−2.4	−7.3	−9.6	−10.3	−11.5	−11.5
Oil revenue		40.3	21.8	10.1	4.7	2.2	1.4	0.0	0.0
	Annual allocation to the budget	40.3	19.6	9.1	4.2	1.9	1.2	0.0	0.0
	Annual allocation to the FFG	0.0	2.2	1.0	0.5	0.2	0.1	0.0	0.0
FFG position		0.0	11.0	17.3	19.7	20.2	20.1	19.8	18.8
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
Total assets		167.8	178.4	130.1	49.7	−47.2	−112.1	−146.4	−195.9
Sensitivity to the FFG return
FFG return		2.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	10.6	15.7	16.7	15.8	15.0	14.1	12.2
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	178.1	128.5	46.7	−51.6	−117.3	−152.0	−202.5
FFG return		6.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	11.3	19.0	23.3	26.0	27.2	27.7	29.0
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	178.8	131.8	53.3	−41.5	−105.1	−138.4	−185.7
FFG return		8.0
Oil wealth (discounted oil revenue)		288.8	230.7	167.6	110.1	52.1	13.8	0.0	0.0
FFG position		0.0	11.7	20.9	27.6	33.4	36.8	38.9	44.8
Debt		−121.1	−63.2	−54.9	−80.1	−119.5	−146.0	−166.1	−214.8
Total assets		167.8	179.1	133.7	57.6	−34.1	−95.4	−127.2	−169.9

Source: Staff estimates and projections.

^{^1/}FFG stands for Fund for Future Generations. Each year, 10 percent of oil revenue is allocated to the Fund and invested at a rate of 4 percent.

43. The non-oil primary balance is an essential indicator of long-term fiscal policy sustainability and a key determinant of the total net wealth.³³ Fiscal sustainability should be analyzed by assessing whether the underlying fiscal policy in the non-oil sector is strong enough to sustain a viable fiscal position in the long run, especially following the depletion of oil reserves. The baseline projections in Table III.2 and Figure III.2 indicate that, even though fiscal policy has been strengthened in recent years so as to significantly reduce the non-oil primary deficit, the latter still represented about 11½ percent of non-oil GDP in 2001 (6½ percent of GDP). If current policies were to continue—that is, maintaining this deficit in terms of non-oil GDP—the net wealth position of the government would become increasingly negative from year 2018 onward, reaching −196 percent of non-oil GDP by year 2030 (Table III.2, baseline). Fiscal adjustment would be needed to avoid such a deterioration and to ensure a successful replacement of oil resources. Therefore, current fiscal policies are unsustainable over the long run.

44. Fund for Future Generations. An alternative strategy would be for the government to save part of the oil revenue so as to compensate for the future depletion of oil reserves. This could be achieved through Gabon’s Fund for Future Generations (FFG), legally created in 1998.³⁴ According to the statutes, 10 percent of the budgeted oil revenue is to be transferred to the FFG until a minimum capital of CFAF 500 billion (about 25 percent of the 2001 non-oil GDP) is attained. Such an arrangement, if applied from 2002, would be a step in the right direction (Table III.2, second panel). However, the simulations at an interest rate of 4 percent show that the amounts to be set aside under the FFG statutes would not allow a replacement of oil revenue in later years. With the FFG attaining only 19 percent of non-oil GDP by 2030, together with a smaller debt reduction, the net wealth position would reach −196 percent of non-oil GDP by year 2030, as under the baseline scenario. To avoid such deterioration in net wealth, considerably larger fiscal adjustment would be needed.

45. The results are sensitive to the assumptions on various parameters, notably on the return on the FFG resources.³⁵ For example, with a return of 8 percent, the FFG position and the net wealth would be about 26 percentage points of non-oil GDP higher (than for an interest rate of 4 percent) by year 2030. (Table III.2 and Figure III.2). Therefore, it is important to maximize the return on FFG resources, as it would not make much sense to keep poorly remunerated funds when the country continues to face challenging development needs and pay high interest rates on its debt.

46. Prospects for a sustainable fiscal path. The following forward-looking scenario, based on the discussion above on fiscal sustainability and intergenerational equity, incorporates an equitable distribution of oil wealth across generations (that is, keeping the income transfer from oil resources and the oil-based wealth constant across generations, as developed in equations (7–11)).³⁶ Simulations of a sustainable path for the non-oil primary balance, the net transfers from the FFG, and the overall primary balance (and, hence, the change in the financial wealth) were conducted under the following assumptions: (i) a growth rate of non-oil GDP of 5 percent equal to the growth rate of the income transfer for oil-based resources; (ii) a return on FFG resources of 7½ percent; and (iii) a target for non-oil debt of 20 percent of non-oil GDP, to be reached in 30 years. The constant oil-based income transfer is calculated from equation (9e) above at about 6.7 percent of non-oil GDP (some US$150 per capita). This resulting sustainable fiscal path entails non-oil primary deficits of about 4 percent of non-oil GDP each year and overall primary surpluses of 2.7 percent of non-oil GDP each year during the 2002-30 period (see table below). These overall surpluses would allow the debt ratio of the debt to non-oil GDP to be reduced to below 70 percent by 2015 and to the target level of 20 percent by year 2030.

47. During the first eight years, transfers to the FFG would represent over half of oil revenue; from 2009 onward, the bulk of the decreasing oil revenue would be transferred to the budget to finance non-oil primary deficits. The projected non-oil primary deficits would be financed by oil revenue allocated directly to the budget and, from 2013 onward, increasingly by transfers from the FFG. As shown in Figure III.3 and the table below, such a strategy would allow a progressive reduction in the debt-to-GDP ratio while keeping the net wealth position at comfortable, positive levels.

48. The debt would be brought from 121 percent of non-oil GDP at end-2001 to below 70 percent (one of the CEMAC’s convergence criteria) by year 2015, eight years before the projected depletion of oil reserves.³⁷ The FFG position would reach US$12 billion by 2025 and would be about US$14 billion in 2030 (or 128 percent of non-oil GDP). Total net wealth would be above US$10 billion after 2025, a level that would be higher than the net position at end-2001.

Gabon: A Path for the Sustainable Replacement of Oil Resources, 2001–30

	2001 Est.	2005	2010	2015	2020	2025	2030
Policy variables	(In percent of non-oil GDP)
Non-oil primary balance	−11.5	−4.0	−4.0	−4.0	−4.0	−4.0	−4.0
Oil revenue	40.4	21.8	10.1	4.7	2.2	0.0	0.0
Oil transfers to the budget	40.4	6.7	6.7	4.7	2.2	0.0	0.0
Primary balance, excluding FFG transfers	28.9	2.7	2.7	0.7	−1.8	−4.0	−4.0
Transfers from the FFG	0.0	0.0	0.0	2.1	4.6	6.7	6.7
Primary balance, including FFG transfers	28.9	2.7	2.7	2.7	2.7	2.7	2.7
Outcomes
Total debt	−121.1	−105.8	−87.4	−69.9	−53.3	−37.4	−22.2
FFG position	0.0	88.2	138.3	154.9	155.1	144.6	127.7
Oil wealth	288.8	230.7	167.6	110.1	52.1	0.0	0.0
Total net wealth	167.8	213.1	218.5	195.1	153.9	107.3	105.4
	(In millions of U.S. dollars)
Total debt	−3,202	−3,400	−3,587	−3,662	−3,560	−3,188	−2,420
FFG position	0	2,834	5,674	8,110	10,366	12,336	13,898
Oil wealth	7,639	7,416	6,877	5,767	3,480	0	0
Total net wealth	4,437	6,851	8,965	10,215	10,286	9,149	11,478

Gabon: A Path for the Sustainable Replacement of Oil Resources, 2001–30

	2001 Est.	2005	2010	2015	2020	2025	2030
Policy variables	(In percent of non-oil GDP)
Non-oil primary balance	−11.5	−4.0	−4.0	−4.0	−4.0	−4.0	−4.0
Oil revenue	40.4	21.8	10.1	4.7	2.2	0.0	0.0
Oil transfers to the budget	40.4	6.7	6.7	4.7	2.2	0.0	0.0
Primary balance, excluding FFG transfers	28.9	2.7	2.7	0.7	−1.8	−4.0	−4.0
Transfers from the FFG	0.0	0.0	0.0	2.1	4.6	6.7	6.7
Primary balance, including FFG transfers	28.9	2.7	2.7	2.7	2.7	2.7	2.7
Outcomes
Total debt	−121.1	−105.8	−87.4	−69.9	−53.3	−37.4	−22.2
FFG position	0.0	88.2	138.3	154.9	155.1	144.6	127.7
Oil wealth	288.8	230.7	167.6	110.1	52.1	0.0	0.0
Total net wealth	167.8	213.1	218.5	195.1	153.9	107.3	105.4
	(In millions of U.S. dollars)
Total debt	−3,202	−3,400	−3,587	−3,662	−3,560	−3,188	−2,420
FFG position	0	2,834	5,674	8,110	10,366	12,336	13,898
Oil wealth	7,639	7,416	6,877	5,767	3,480	0	0
Total net wealth	4,437	6,851	8,965	10,215	10,286	9,149	11,478

F. Conclusions and Policy Implications

49. Although traditional indicators appear to suggest that since 1994 there has been progress toward fiscal sustainability and a clear shift from past policies, the fiscal situation remains fragile, particularly in the face of the expected decline in oil production and revenue. Therefore, forward-looking policies are needed to ensure that drastic policy revisions are not necessary when the oil wealth comes to exhaustion. In this context, there is a case for aiming at a non-oil primary deficit that ensures long-term fiscal sustainability and for setting aside some oil revenue so as to enable future generations to benefit from the adequate provision of public goods, after the oil resources have been exhausted. The immediate policy implications are that the authorities should pursue their efforts to consolidate public finances by improving non-oil revenue through a broadening in the tax base, by strengthening expenditure management and control, by reorienting public spending in line with the poverty reduction strategy, and by actually constituting the Fund for Future Generations. On the latter, the level of oil revenue savings needed to ensure fiscal sustainability and intergenerational equity would be higher than envisaged under the 1998 statutes of the FFG. Given the short maturity of Gabon’s debt, fiscal sustainability will, however, also be helped by significant debt relief, which would allow a longer repayment period. In addition, in view of the unfavorable social indicators, the authorities will have to strike a delicate balance between meeting the existing basic development needs and setting aside savings for future generations.

ANNEX Conceptual Framework: An Intergenerational Model

The optimum spread of oil revenue can be analyzed in the context of a simple intergenerational model of maximization of a social welfare W, with representative citizens in periods t and t+1 with similar utility functions U and consuming c(t) and c(t+1), respectively. Citizens of the current generation (N) have an income Γ(t) generated from transfers received from the government. For simplicity, the oil sector is under government control, and there is no production in the non-oil sector. The current generation saves F(t) in favor of the next generation, whose population is N(l+η), where η is the population growth rate. The government perceives a rent on oil resources in terms of royalties and other taxes. The problem is to find c(t) and c(t+1) that are solutions to the following intergenerational optimization problem:

\begin{matrix} M a x W = U (c (t)) + β U (c (t + 1)) & (1) \end{matrix}

s.t:

N c (t) + F (t) = Γ (t)

N (1 + η) c (t + 1) = (1 + r) F (t),

where β is a discount factor indicating the time preference and r the market interest rate.³⁸

Optimal consumption levels in t and t+l are functions of the income per capita and the time preference parameter β. While both consumption sets are affected positively by the income, the impact of β on c(t) is negative while it is positive on c(t+1), underscoring the role played by β in determining the savings of the current generation in favor of the future generation (saving by the current generation is an increasing function of β). The consumption by the future generation depends on the consumption of the current generation, as indicated by relation (8):

\begin{matrix} c (t + 1) = c (t) (1 + r) β / (1 + η) . & (2) \end{matrix}

The equitable consumption path, where consumption is equal across generations, is given by β = (1+η)/(1+r). In this context, the higher the population growth rate, the larger will be the resources set aside for future generations so as to ensure equitable wealth redistribution across generations. When β > (1+η)/(1+r), the current generation cares for future generations to the extent that it saves enough so as to allow higher consumption by them. When β < (1+η)/(1+r), the current generation saves less for future generations, thereby lowering their consumption.

If one interprets Γ(t) as the oil wealth, that is, the discounted government revenue derived from oil reserves, the analysis has profound fiscal policy and intergenerational welfare implications. Depending on the value of β, the government will seek intergenerational equity or will favor the current or future generations. Current government policies (deficits or surpluses) are indications of the weight the government gives to the current generation as against future generations.

For plausible values of β (i.e., almost or exceeding one) current generations should generate fiscal surpluses derived from oil resources and accumulate financial assets that would replace the oil wealth after the depletion of oil reserves. The return on these financial assets would later on help finance the fiscal deficits run by future generations.

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This section has been prepared by Joseph Ntamatungiro.

In 1982, the implicit interest rate averaged 14 percent (22 percent for floating rates and 8 percent for fixed rates). In 1979, the average maturity of Gabon’s debt was about three years.

Until the early 1980s, bank loans and export credits represented the bulk of Gabon’s external debt. Since then, the debt composition changed somewhat in favor of bilateral loans (mainly Paris Club creditors), with somewhat longer maturities.

Seigniorage in CFA franc countries is limited by the requirement that central bank financing (statutory advance) during period t should not exceed 20 percent of revenues collected in period t-l. However, since no limit is set on the government borrowing from commercial banks, there is a risk of crowding out the private sector. Such a risk is alleviated by the setting of targets on net bank credit to government under the BEAC’s monetary programming exercise, as well as in the context of Fund-supported programs.

The accumulation of domestic payments arrears had a negative impact on private investment and the local banking system. Following a comprehensive audit in 1999, the government has stepped up their clearance, notably in the context of commercial agreements with domestic creditors (so-called securitization).

The issue of the desirable level of the debt-to-GDP ratio is addressed in Subsections D and E.

The second term of (6b) is close to (d₀ − d_n)/n, i.e., the debt reduction divided by the number of years to achieve it.

b is more sensitive to the difference between g and r than to levels.

The ratio of 40 percent of GDP corresponds to about 70 percent of non-oil GDP. A debt-to-GDP ratio of 70 percent is one of the four convergence criteria required by the CEMAC. As underlined in the next subsection, a debt ratio based on the non-oil GDP would be more relevant, especially in view of the projected decline in oil production.

Oil currently contributes 40 percent of Gabon’s GDP, about half of total government revenue and three quarters of exports.

For a framework for the optimal exploitation of irreplaceable resources, see Hotelling (1931). Caution should be exercised in valuing oil resources, since the volatility of oil prices or exchange rate depreciations could lead the government into an unsustainable consumption path based on a poor valuation. Accordingly, the value of oil wealth should be reexamined continuously (see Tersman (1991) in the case of Norway).

For an analysis of the experience of policies in a number of oil producing countries, see Liuksila, Garcia, and Basssett (1994). The authors noted the headway made in Mexico, Egypt, and Indonesia in the diversification of sources of government revenue; however, while the experience was mixed in the cases of Nigeria and Venezuela.

For a forward-looking balance sheet approach, see Tersman (1991) and Liuksila, Garcia, and Bassett (1994).

Another reason to keep the set-aside oil income in international assets is to protect these resources from political spending pressures and to insulate the domestic economy from volatility of oil revenues (see Davis and others (2001)).

The current analysis does not deal with precautionary policies aimed at smoothing oil revenue (excess oil revenue saved to be used when oil revenue is below the permanent income level), including the use of market-based hedging instruments. Limitations to the use of futures markets or options as hedging tools include (i) the basis risk; (ii) inadequate expertise; (iii) difficulty to pay deposit and margin calls, and premiums; and (iv) the fact that the government is not always the producer/seller of oil resources.

For a conceptual framework for intergenerational welfare optimization, see the annex at the end of this section.

For a finite horizon (T) for the exploitation of oil resources, the oil wealth amounts to Vo_t = To_t([(1+λ)(1+e)/(1+r)]^T−t+1−1)/[(1+λ)(1+e)/(1+r)−1].

Net foreign assets of the central bank are not included in the government’s net position, given their past volatility and their current low level (negative during 1998-99 and less than 3 percent of GDP during 2000-01). Similarly, privatization proceeds were not included, with past experience indicating that they have barely covered restructuring costs.

This assumption may be restrictive as it assumes the absence of new oil discoveries.

In the following discussion, no inflation is assumed in the long run. Therefore, projections for interest rates and GDP growth rates make no difference between nominal and real rates.

It is assumed that the best estimate of future prices is the current price (E_tP_t+j = P_t).

Chalk (1998) uses the term “core deficit” in his analysis for countries producing nonrenewable resources.

For a discussion on the setting up and the use of savings funds for nonrenewable resources, see Davis and others (2001) and Liuksila, Garcia, and Bassett (1994). The literature indicates that the constitution of savings funds is not a panacea as it has not been successful in disconnecting expenditure decisions from oil revenue developments. Liuksila, Garcia, and Bassett also show how oil contingency mechanism funds established by Venezuela had limited success due in part to pressing expenditure needs and to the diversion of resources.

Higher production and oil prices would improve Gabon’s financial prospects; however, they would not fundamentally change the thrust of the analysis.

As noted above, oil-based income transfers and wealth can either be constant in per capita terms, that is, growing over time at the same rate as population growth, or constant relative to GDP, that is, growing over time at the same rate as real GDP.

Given the short maturities that characterize Gabon’s debt, a primary surplus of 2.7 percent of non-oil GDP might not be sufficient to service the debt in the medium term. Debt relief from external creditors would be necessary to spread the debt repayment over a longer period and to facilitate the constitution of savings in the FFG during the initial years. Also, depending on the level of the return on FFG resources relative to interest payments on debt, the government might allocate more oil revenue for debt repayment.

For a log utility function, the solution to this problem is

c(t) = [Γ(t)/N]/(1+β)

c(t+1) = [(1+r)Γ(t)/N(1+η)]β/(1+β)

F(t) = Γ(t)β/(1+β).

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Gabon: Selected Issues and Statistical Appendix

Author: International Monetary Fund

Volume/Issue:: Volume 2002: Issue 094

Publisher:: International Monetary Fund

ISBN:: 9781451813883

ISSN:: 1934-7685

Pages:: 136

DOI:: https://doi.org/10.5089/9781451813883.002

Keywords
III. Analysis of Fiscal and Debt Sustainability12
References

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Gabon: Estimated Primary Balance Gaps, 1991–2001

(In percent of CDP)

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Gabon: Total Asset Projections: No Policy Change, 2001–30

(In percent of non-oil GDP)

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Gabon: Possible Policy Options and Fiscal Sustainability, 2001–30

Gabon: A Path for the Sustainable Replacement of Oil Resources, 2001–30

	2001 Est.	2005	2010	2015	2020	2025	2030
Policy variables	(In percent of non-oil GDP)
Non-oil primary balance	−11.5	−4.0	−4.0	−4.0	−4.0	−4.0	−4.0
Oil revenue	40.4	21.8	10.1	4.7	2.2	0.0	0.0
Oil transfers to the budget	40.4	6.7	6.7	4.7	2.2	0.0	0.0
Primary balance, excluding FFG transfers	28.9	2.7	2.7	0.7	−1.8	−4.0	−4.0
Transfers from the FFG	0.0	0.0	0.0	2.1	4.6	6.7	6.7
Primary balance, including FFG transfers	28.9	2.7	2.7	2.7	2.7	2.7	2.7
Outcomes
Total debt	−121.1	−105.8	−87.4	−69.9	−53.3	−37.4	−22.2
FFG position	0.0	88.2	138.3	154.9	155.1	144.6	127.7
Oil wealth	288.8	230.7	167.6	110.1	52.1	0.0	0.0
Total net wealth	167.8	213.1	218.5	195.1	153.9	107.3	105.4
	(In millions of U.S. dollars)
Total debt	−3,202	−3,400	−3,587	−3,662	−3,560	−3,188	−2,420
FFG position	0	2,834	5,674	8,110	10,366	12,336	13,898
Oil wealth	7,639	7,416	6,877	5,767	3,480	0	0
Total net wealth	4,437	6,851	8,965	10,215	10,286	9,149	11,478

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Abstract

III. Analysis of Fiscal and Debt Sustainability12

A. Background

B. Conceptual Framework for Debt and Fiscal Sustainability

C. Gabon’s Fiscal Performance, 1991–2001

D. Achieving a Normative Debt-to-GDP Ratio

E. Fiscal Sustainability in the Face of Exhaustible Resources

Introduction

Framework for fiscal sustainability and intergenerational equity

Application to Gabon

F. Conclusions and Policy Implications

ANNEX Conceptual Framework: An Intergenerational Model

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Food and Agriculture Organization

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III. Analysis of Fiscal and Debt Sustainability¹²