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How to Adjust to a Large Fall in Commodity Prices
Author:
Mr. Paulo A Medas
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Ms. Veronique Salins
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Mr. Jeff Danforth
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Series:
IMF How To Notes
Volume/Issue:
Volume 2016: Issue 001
Language:
English
Publication Date:
27 Sep 2016
DOI:
https://doi.org/10.5089/9781475536065.061
ISBN:
9781475536065
ISSN:
2522-7912
Pages:
18
Keywords:
FADHTN; HTN; commodity; price; revenue; budget; commodity resource; commodity revenue; price fluctuation; revenue windfall; impact of commodity price booms; revenue boom; challenges facing commodity exporter; commodity exporter; revenue potential; resource boom; Fiscal consolidation; Commodity prices; Natural resources
Legal-disclaimer:
Fiscal Affairs Department (FAD) How to Notes offer practical advice from IMF staff members to policymakers on important fiscal issues. The views expressed in FAD How to Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Resource-rich countries have to manage highly volatile commodity revenues. In periods of revenue booms there is a tendency for large spending scale-ups. When facing large and persistent reductions in commodity prices, some of these countries will need to adjust their budgets to the new reality. In many cases, overall surpluses turn into large fiscal deficits and borrowing costs tend to rise with the fall in commodity prices. This note discusses how to undertake large fiscal adjustments, which often tend to be protracted and with long-lasting impacts on growth. Consequently, the note also highlights how to better prepare for future booms and busts in commodity prices.
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IMF How To Notes
ISSN:
2522-7912
Publisher:
International Monetary Fund