Public Investment in a Developing Country Facing Resource Depletion
This paper analyses the tradeoffs between savings, debt and public investment in the Republic of Congo
Abstract
This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio. However, structural reforms that improve the efficiency of public investment can allow for a relatively faster buildup of sustainable public capital and sustain higher non-oil growth without adversely affecting the debt ratio or savings. Moreover, we show that even if a government pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of exhaustible and volatile resource revenues, low public investment quality in the form of a misallocation of resources can hinder attainment of sustainable public capital and positive non-oil growth.
This work is part of the ‘Macroeconomics in Low-income countries’ programme
Citation
Adrian Alter, Matteo Ghilardi, Dalia S Hakura (2016) Public Investment in a Developing Country Facing Resource Depletion. IMF Working Paper No. 15/236
Links
Public Investment in a Developing Country Facing Resource Depletion