Fiscal Monitor

The Commodities Roller Coaster

September 2015

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Fiscal Monitor

A Fiscal Framework for Uncertain Times

 




Natural resource-rich countries benefited from an exceptional commodity price boom during the 2000s, with metal and oil prices reaching historic highs. This provided a substantial boon to resource-rich developing countries, which benefited from large increases in fiscal revenues and the opportunity to promote economic transformation and development.

However, the more recent reversal in commodity prices has driven home the fact that commodity prices are volatile, unpredictable, and subject to long-lasting shocks. It has also meant that commodity exporters will need to adjust to a—possibly protracted—period of lower export and fiscal revenues.

In light of this recent development, this issue of the Fiscal Monitor examines the conduct of fiscal policy under the uncertainty caused by dependence on natural resource revenues. It draws on extensive past research on the behavior of commodity prices and their implications for macroeconomic outcomes, as well as on extensive IMF technical assistance to resource-rich economies seeking to improve their management of natural resource wealth.

Content

Front Matter

Chapter 1: The Commodities Roller Coaster: A Fiscal Framework for Uncertain Times

  • How Commodity Cycles Affect the Economy
  • Fiscal Policy during Booms and Busts: A Difficult Balancing Act
  • Long-Term Fiscal Management under Uncertainty
  • A Risk-Based, Comprehensive Approach to Fiscal Policy
  • Conclusion
Table
1.6.1 Energy Subsidies in Selected Oil Exporters
Annexes
1.1 Data Sources
1.2 Selected Experiences with Fiscal Rules and Resource Funds in Latin America and the Caribbean
1.3 Public Investment in Oil-Producing Countries of the Middle East
1.4 How Selected Sub-Saharan African Countries Have Used Commodity Windfalls
Boxes
1.1 Long-Term Management of Natural Resources
1.2 A Benchmark for Stabilization Savings
1.3 IMF Technical Assistance to Help Countries Manage Their Natural Resource Wealth
1.4 The Vital Role of Transparency for the Successful Management of Natural Resources
1.5 Fiscal Rules for Resource-Rich Countries
1.6 The Large Size of Global Energy Subsidies
Figures
1.1 Nonrenewable Commodity Exporters, 2014
1.2 Sovereign Wealth Funds, 2014
1.3 A Poor Record of Forecasting Oil Prices
1.4 Impact of Commodity Price Swings on Fiscal Revenues and Exports
1.5 Impact of the 1970s–80s Boom-Bust on Growth
1.6 Public Expenditure Procyclicality across Countries
1.7 Cyclically Adjusted Nonresource Balance and Procyclicality
1.8 Procyclicality and Growth
1.9 Positive Impact of Good Institutions on Fiscal Policy
1.10 Institutional Quality in Resource-Rich Countries
1.11 Spending during the 2000–08 Boom
1.12 Current and Capital Spending during the 2000–08 Boom
1.13 Impact of Public Capital Spending Scaling up on Growth
1.14 Health and Education during the 2000–08 Commodity Boom
1.15 Fuel Subsidies in Oil-Exporting Countries
1.16 Simulation of the Impact of Various Strategies to Manage Resource Wealth under Uncertainty
1.17 Saving Rates during Boom Years
1.18 Impact of the Fall in Commodity Prices on Fiscal Balances in Resource-Rich Countries
1.19 Tax Revenue in Resource-Rich Countries
1.20 Resource and Nonresource Revenues
1.21 Revenue Shares from Taxation in Resource-Rich Countries, 1990–2014
1.2.1 Precautionary Buffers under Different Degrees of Risk Tolerance
1.5.1 Size of Global Energy Subsidies

Methodological and Statistical Appendix

  • Data and Conventions
  • Fiscal Policy Assumptions
  • Definition and Coverage of Fiscal Data
  • Table A. Advanced Economies: Definition and Coverage of Fiscal Monitor Data
  • Table B. Emerging Market and Middle-Income Economies: Definition and Coverage of Fiscal Monitor Data
  • Table C. Low-Income Developing Countries: Definition and Coverage of Fiscal Monitor Data
  • List of Tables
    •     Advanced Economies (A1–A8)
    •     Emerging Market and Middle-Income Economies (A9–A16)
    •     Low-Income Developing Countries (A17–A22)
Tables
A1. Advanced Economies: General Government Overall Balance, 2006–20
A2. Advanced Economies: General Government Primary Balance, 2006–20
A3. Advanced Economies: General Government Cyclically Adjusted Balance, 2006–20
A4. Advanced Economies: General Government Cyclically Adjusted Primary Balance, 2006–20
A5. Advanced Economies: General Government Revenue, 2006–20
A6. Advanced Economies: General Government Expenditure, 2006–20
A7. Advanced Economies: General Government Gross Debt, 2006–20
A8. Advanced Economies: General Government Net Debt, 2006–20
A9. Emerging Market and Middle-Income Economies: General Government Overall Balance, 2006–20
A10. Emerging Market and Middle-Income Economies: General Government Primary Balance, 2006–20
A11. Emerging Market and Middle-Income Economies: General Government Cyclically Adjusted Balance, 2006–20
A12. Emerging Market and Middle-Income Economies: General Government Cyclically Adjusted Primary Balance, 2006–20
A13. Emerging Market and Middle-Income Economies: General Government Revenue, 2006–20
A14. Emerging Market and Middle-Income Economies: General Government Expenditure, 2006–20
A15. Emerging Market and Middle-Income Economies: General Government Gross Debt, 2006–20
A16. Emerging Market and Middle-Income Economies: General Government Net Debt, 2006–20
A17. Low-Income Developing Countries: General Government Overall Balance, 2006–20
A18. Low-Income Developing Countries: General Government Primary Balance, 2006–20
A19. Low-Income Developing Countries: General Government Revenue, 2006–20
A20. Low-Income Developing Countries: General Government Expenditure, 2006–20
A21. Low-Income Developing Countries: General Government Gross Debt, 2006–20
A22. Low-Income Developing Countries: General Government Net Debt, 2006–20

Back Matter