Prepared by S. Tapsoba.
IMF (2012) “Macroeconomic Policy Frameworks for Resource-Rich Developing Countries,” IMF Policy Paper.
See the 2013 British Petroleum Statistical Review of World Energy.
IMF (2012), “Macroeconomic Policy Frameworks for Resource-Rich Developing Countries—Background Paper 1—Supplement 1,” IMF Policy Paper, p. 61, Washington, DC: IMF.
See the 2013 edition of J.P. Morgan Asset Management’s long-term Capital Market Return Assumptions.
Based on Tabova and Baker (2012). “Non-oil Growth in the CFA Oil-Producing Countries: How Is It different?” In Akitoby and Coorey (Eds.), Oil Wealth in Central Africa: Policy for Inclusive Growth.
IMF (2012). “Macroeconomic Policy Frameworks for Resource-Rich Developing Countries,” IMF Policy Paper.
This approach has several variants (e.g., infinite or finite horizon; spending constant in real, per capita, or as share of non-resource GDP; and using the perpetuity or annuity value of the financial wealth of the resource revenue windfall) which can determine the sustainable path for the non-oil primary deficit.
These tools can be used either for investment scaling-up or scaling-down scenarios.
The benchmark is significant loosened to an NOPD of 4.3 when the annuity allocation principle is considered but gross financial savings becomes negative.
We also explored the effect of doubling the efficiency of public investment (i.e., the elasticity of investment with respect to the real non-oil output) and find no significant changes in the sustainable benchmarks.
The numbers in the price rule refer, in order, to the number of years in the past, present, and future used to calculate the expenditure path. Thus, the 5/0/0 price rule uses oil prices for the past five years only to calculate the smoothed resource revenue. A 5/1/5 price rule uses prices for the past 5 years, the current price, and prices forecast for the following five years.
Such a rule is desirable to guide the scaling up of public investment where there are absorptive capacity constraints (Berg and others, 2012) and where the volatility of resource windfalls requires precautionary savings (van der Ploeg, 2011).
Net cumulative financial savings will be lower as financial liabilities are accounted for.
Schaechter, A., T. Kinda, N. Budina, and A. Weber, 2012, “Fiscal Rules in Response to the Crisis—Toward the ‘Next Generation’ Rules. A New Dataset,” IMF Working Paper 12/187 (Washington: International Monetary Fund).
See October 2014 WEO (Chapter 3: Is It Time for an Infrastructure Push? The Macroeconomic Effects of Public Investment) and the June 2015 FAD board paper (“Making Public Investment More Efficient”).