Recently it has become popular among oilproducing countries to establish oil revenue funds, which are believed. Global energy supplies have recently failed to keep pace with constantly rising global demand for energy. However, the majority of the worlds proven oil reserves are in developing countries and economies in transition, which often lack sophisticated. Oilproducing countries face challenges arising from the fact that oil revenue is exhaustible, volatile, and uncertain, and largely originates from abroad. The contribution of the oil sector to arab economic development by. An overview jeffrey davis, rolando ossowski, and annalisa fedelino.
The political economy of fiscal policy and economic. Fiscal policy in oil producing countries during the recent. Use features like bookmarks, note taking and highlighting while reading fiscal policy formulation and. Their study showed that resourcedependent economies tend to grow more slowly than nonresourcedependent ones at comparable levels of development. Uvadare digital academic repository how to of fiscal.
Dutch disease, short to mediumterm procyclical fiscal policy and longrun boombust cycles. Fedelino and brings together papers that deal with a wide range of macroeconomic and fiscal issues in oilproducing countries, and aims at providing policy recommendations drawing on theory and country experience. Fiscal breakeven oil prices council on foreign relations. Fiscal policy formulation and implementation in oilproducing. However, despite their huge natural resources, many oil producers have had disappoint, isbn 9781589061750 buy the fiscal policy formulation and implementation in oilproducing countries ebook. A government in deficit can face pressure to raise. Many of the papers were presented at the conference on fiscal policy formulation and implementation in oilproducing countries organized by the imfs fiscal affairs department fad during june 56, 2002, and benefited from comments of participants in the conference. Oil rents and economic growth in oil producing countries. Reflecting these challenges, the paper proposes some important general principles for the formulation and assessment of fiscal policy in these countries. In a poor country, fiscal policy can no longer remain a compensatory fiscal policy. Oct 16, 2014 from moscow to caracas, riyadh to baghdad, in tehran, algiers, kuwait city and lagos, officials are confronting the plunge in prices roughly 25 percent since a peak in june. The role of fiscal institutions in managing the oil revenue boom.
However, despite their huge natural resources, many oil producers have. Policy instrument an overview sciencedirect topics. Factors influencing policy formulation and decision. Operational aspects of fiscal policy in oilproducing. The main findings can be summarized in some key guidelines. Policy formulation should factor in the exhaustibility of the natural resources and aim at reducing oil revenue volatility passed on to the economy. Hence, the analysis needs to incorporate an osf and an osf allocation rule. However, oil producing countries outside the opec lacked such spare capacity and thus continued to increase investment in oil production to meet global oil demand. Resourcerich countries often face three major macroeconomic challenges.
Operational aspects of fiscal policy in oilproducing countries october 2002. Stabilization and savings funds for nonrenewable resources. However, at many stages of the policy formulation, input is sought from the reserve bank. A primary concern for fiscal policy in these countries is determining how much of current oil revenue should be spent on current government expenditure and how much should be saved for future policy actions. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non oil growth prospects. Fiscal policy is captured by restrictions on the size of the non oil primary deficit nopd of the public sector plus the rule for allocating current oil revenues between the osf and the budget. Use the free adobe acrobat reader to view pdf files. Thus, the ratio of the nrb to nrgdp is a reliable and informative fiscal indicator for short and longterm analysis and fiscal policy formulation in resourcerich countries medas and zakharova. Oilproducing country stabilization fund abstract setting an optimal.
The political economy of fiscal policy and economic management. Policy formulation clearly is a critical phase of the policy process which also is an explicit subject of policy design. Davis, ossowski, and fedelino 2003 looked at fiscal policy formulation and implementation in oilproducing countries. Fiscal vulnerability to resourceprice reversals fiscal positions are often vulnerable to reversals after price booms in resourcerich economies. Xiao ye and other colleagues who have provided material for this paper as well as the discussants and other participants in the conference who provided useful comments. The extractive industries ei sector occupies an outsize space in the economies of many developing countries. No single definition it is what governments say and do or do not a public policy is a plan of action undertaken by government to achieve some broad purpose affecting large.
The fiscal policy in developing countries should apparently be conducive to rapid economic development. Process of public policy formulation in developing countries prof. Introduction man as an individual and in society is a being of social nature. In the mid1800s, kerosene produced from refined crude oil begins to make its way onto the market in. Governments in each of these countries must look beyond the global crisis and make courageous tradeoffs to ensure a sustainable future for public finances.
The views expressed in this paper are those of the authors and should not be attributed to the world bank or to its executive directors or the. Attitudes, social values and norms of the top management. Nigerian content policy in the oil and gas industry. Panel var analysis and the associated impulse responses indicate that in countries where the oil sector is large in relation to the economy, oil price changes affect the economic cycle only through their impact on fiscal policy. Paper prepared for imf conference on fiscal policy formulation and implementation in oil producing countries, june 56, 2002. Also, the implementation of the local content development policy may be. Fiscal policy can play a central role in determining the extent to which a country benefits from its oil wealth. Process of public policy formulation in developing countries. It is the sister strategy to monetary policy through which a. Policy instrument is a linkage between policy formulation and policy implementation. Policy makers, economists, and public finance professionals working in such. Past fiscal policy in nigeria has not been successful in this regard, since both revenue and expenditure have been highly.
A survey of environmentally relevant clauses the oil and gas industry faces increasingly strict environmental standards in developed countries. The public policy formulation is part of the predecision. Investment policy prospects in the oil and gas producing countries resource nationalism is a cyclical phenomenon whereby governments assert varying degrees of control over natural resources located within their territories, in an attempt to maximise revenue. This paper specifically focuses on how the lc policy has impacted on small to mediumsized oil servicing firms operating within the oil and gas industry and data was collected using the multiplecase study method, from two case companies. The fiscal management of natural resource revenues in a developing country setting english abstract. Fiscal policy formulation and implementation in oilproducing countries kindle edition by davis, jeffrey m. Effectiveness in this context means whether the national fund helps to stabilize government expenditure and reer. Eduardo engel and rodrigo valdes latin american and. The role of national oil companies in international. Fiscal policy formulation and implementation in oil producing. However, despite their huge natural resources, many oil producers have had disappointing growth, widespread poverty, and continuing vulnerability to oil price and other external shocks. Fiscal policy can play a central role indetermining the extent to which a country benefits from its oil wealth. Read fiscal policy formulation and implementation in oilproducing countries by jeffrey mr.
This book brings together studies that provide analysis and findings on fiscal policy issues in oil producing countries from a diverse international perspective. Promotion of mutual investments between oil producing and. Oilproducing countries and the use of special fiscal institutions zmany opcs have had difficulties in addressing the challenges posed by dependence on oil revenues. Fiscal policy formulation and implementation in oil. Oil prices and the fiscal policy response in oilexporting. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square ols in a multiple form to ascertain the relationship between economic growth and government expenditure. What actors do in policy formulation, how they do it, and with what effect, depend in large part on the type of advisory system present in a specific government or area of interest brint, 1990. Implementation in oil producing countries, washington, d.
This harmonisation of policies is enacted in the rbf act and is effected through a number of institutional. Measuring fiscal performance in oilproducing countries. Non oil producing countries in the middle east and north africa have spent the last decade working to achieve fiscal consolidation. Bhola 2004 suggests that policy implementation is a process to actualise, apply and. Countries with large oil resources can benefit substantially from them. However, despite their huge natural resources, many oil producers have had disappointing growth, widespread poverty, and. Throughout the 1990s and into the next century, economic liberalization, market economy reforms and westernstyle corporatization management reorganizations have characterized the oil and gas industries of major energy. The implementation encloses all actions that take place during the realisation of the plans, i. Fiscal adjustment in nonoil producing mena countries. This paper presents a detailed analysis of the average fiscal policy responses of oil producing countries opcs to the recent oil price cycle. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nations economy. There is the existence of a strong cointegration relation between government spending and oil prices the paper found fiscal policy to be procyclical in oil producing countries, i. Many estimate oil sands place the countrys oil reserves pdf second to saudi arabia. We refer to this problem as the optimal consumption problem.
Download it once and read it on your kindle device, pc, phones or tablets. This book brings together studies that provide analysis and findings on fiscal policy issues in oilproducing countries from a diverse international perspective. The united states dependence on oil has long influenced its foreign policy. Do phu hai, faculty of public policy graduate academy of social science gass, vietnam abstract. The per capita oil consumptioneconomic growth nexus is examined in a panel of oil producing countries over a long time span 19702012, controlling for the exports of goods and services, the ratio of oil production to primary energy consumption, the oil rents, and international crude oil prices. The paper presents numerical simulations of various fiscal rules for oil producing countries. Is fiscal policy procyclical in developing oilproducing.
Development partners have little direct leverage on oilexporting countries, but can help through. Introduction fiscal policy formulation and implementation in oilproducing countries was edited by j. The exhaustibility and volatility of natural resource revenues pose wellknown economic challenges, of which those facing oil producers are the most prominent. Jun 19, 2008 european commission press release details page brussels, 19 june 2008 oil prices what are the structural factors behind the rising oil prices. The investment challenge for oil producing countries. Fiscal policy in oilproducing countries can be profoundly affected by oil revenue uncertainty and volatility. The fiscal management of natural resource revenues in a. The intention in policy formulation is reflected in policy implementation through instrument. Lee fiscal policy formulation and implementation in oilproducing countries por jeffrey mr. What is not well recognized is that during the mid1980s, the oil market reached a turning point in which demand for opec oil slowly started to increase. This paper empirically assesses the impact of oil price shocks on the underlying non oil economic cycle in oil exporting countries. Policy formulation and implementation 1 portal written. This volume brings together papers that deal with a wide range of macroeconomic and fiscal issues in oil producing countries, and aims at providing policy recommendations drawing on theory and country experience. In fiscal policy formulation and implementation in oilproducing countries, ed.
Finalized in 2007, the project explores the influence of emerging national oil companies and partially privatized national oil companies on international energy markets. From a shortrun perspective, the nonoil balance is a key indicator of government demand on the economy. Fiscal policy in oil producing countries during the recent oil price cycle. Read fiscal policy formulation and implementation in oil producing countries by jeffrey mr. The ppam programme includes in addition to some of the above policy analysis, policy implementation. Of the top 20 oil producing companies in the world, 14 are nocs or newly privatized nocs. Oil revenues and fiscal policy overview challenges posed by oil revenue fiscal policy and macroeconomic stability the non oil primary balance fiscal policy and intergenerational issues oil funds expenditure management some guidelines oil producing countries differ importance of oil in the economy and fiscal accounts development of the non oil. Policy formulation and implementation 6 portal written material implementation is normally regarded as a vital and often neglected phase of strategic planning. In oilproducing countries, a relatively small decline in oil prices leads to a. The discussion of longrun fiscal issues in section ii and the shortrun analysis of fiscal policy in section iii have highlighted the importance of the nonoil fiscal balance as a fiscal indicator in oilproducing countries.
The western iocs now control less than 10% of the worlds oil and gas resource base. Prepared by mauricio villafuerte and pablo lopezmurphy1. Poverty is still widespread in a number of oilproducing countries. Perhaps, when mutual investments between oil producing and consuming countries having equitable investment along the entire value chain in both producing and consuming markets, this dream of finding theright price for oil will be achieved. Economic and financial resources available to it at a particular point of time. The distribution of non oil wealth is important for countries with relatively low oil reserves. The minister, who believed that the meeting with lamamra and boutarfa was very fruitful, added that the meeting concluded a series of meetings with officials from various oil producing countries such as russia, iraq, iran, kuwait, oman, saudi arabia and qatar. Fiscal policy challenges in oilexporting countries arab. This volume brings together papers that deal with a wide range of macroeconomic and fiscal issues in oilproducing countries, and aims at providing policy recommendations drawing on theory and country experience. Operational aspects of fiscal policy in oilproducing countries. It has a tough role to play in a developing economy and has to face the problem of growthcumstability.
In terms of current world oil production, nocs also dominate. Fiscal policy formulation and implementation in oilproducing countries. The fourth explores the broader economic and financial ramifications of the collapse in the price of oil. Jul 31, 2014 liuksila c, garcia a, bassett s 1994 fiscal policy sustainability in oil producing countries. Fall in oil prices poses a problem for russia, iraq and others. A primer on fiscal analysis in oilproducing countries. How to of fiscal sustainability in oilrich countries. The current section tests the effect of fiscal policy on oil production, the national funds revenue, gross international reserves and the effectiveness of the national fund. Oil exporters to continue coordination towards final market.