Managing the revenue from natural resources—what’s a Finance Minister to do?


By Sanjeev Gupta and Enrique Flores

(Versions in Español)

The Finance Minister answers her mobile. On the line is the Minister of Energy, who informs her that the country has struck oil and that he expects revenues from its sale to start flowing into the budget in the coming four years. While excited by the prospects of higher revenues—indeed the average resource-rich country gets more than 15 percent of GDP in resource revenues—she starts to ponder how to use these revenues for her country’s development. She is aware that only in rare cases have natural resources served as a catalyst for development; too often they have led to economic instability, corruption, and conflict or what has been termed as “the resource curse.”

SDN on Resource Wealth.Chart1

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Africa’s Success: More Than A Resource Story


Antoinette SayehBy Antoinette M. Sayeh

When meeting with people outside Africa, I’m often asked whether Africa’s growth takeoff since the mid-1990s has been simply a “commodity story”—a ride fueled by windfall gains from high commodity prices. But finance ministers and other policymakers in the region, and I was one of them, know that the story is richer than that.

In this spirit, in our latest Regional Economic Outlook: Sub-Saharan Africa a team of economists from the IMF’s African Department show that Africa’s continued success is more than a commodity story.  In fact, quite a few economies in the region have become high performers without basing their success on natural resources—thanks in no small part to sound policymaking.

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Top 20 — iMFdirect’s Top 20 list


Three years after the launch of iMFdirect as a forum for discussing economic issues around the world, we look back at some of our most popular posts.

The IMF blog has helped stimulate considerable debate about economic policy in the current crisis, on events in Europe and around the world in Asia, Africa, Latin America, and the Middle East, on fiscal adjustment, on regulating the financial sector, and the future of macroeconomics–as economists learn lessons from the Great Recession.

As readers struggled to understand the implications of the crisis, our most popular post by far was IMF Chief Economist Olivier Blanchard’s Four Hard Truths, a look back at 2011 and the economic lessons for the future.

Here’s our Top 20 list of our most popular posts by subject (from more than 300 posts):

1.  Global Crisis: Four Hard Truths; Driving With the Brakes On

2.  Financial Stability: What’s Still to Be Done?

3.  Fiscal Policy:  Ten Commandments ; Striking the Right Balance

4.  Macroeconomic Policy: Rewriting the Playbook;  Nine Tentative Conclusions ; Future Study

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Escaping the Resource Curse


By Mauricio Villafuerte

(Version in عربي)

It reads like a script for a Hollywood movie—a poor protagonist happens upon an opportunity that has the potential of bestowing riches, but an evil curse threatens to spoil it all.

Unfortunately, it’s not a movie script. The scenario plays out repeatedly in many parts of the real world all the time. For many developing countries, managing natural resources and the increased revenues they bring is a tough haul.

Cue the extensive literature on the “resource curse” and the lack of consensus on how to run fiscal policy and manage budgets in resource-rich countries.

In some respects, this is like the “all-too-similar” sequel, because the tribulations associated with how to best manage natural resources, such as oil, minerals, and gas, seem to endure so that resource-rich developing countries are never quite free of them.

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Africa’s New Janus-Like Trade Posture


By Antoinette M. Sayeh

It wasn’t all that long ago when virtually all of sub-Saharan Africa’s exports were destined for Europe and North America.

But the winds of Africa’s trade have shifted over the past decade. There has been a massive reorientation towards other developing countries, in particular China and India.

Like Janus, the Roman god, Africa’s trade is now, as it were, facing both east and west.

Our latest Regional Economic Outlook for sub-Saharan Africa looks closely at these developments and its policy implications.

In addition to the well-known gains from international trade, Africa’s trade reorientation is also beneficial because it has broadened the region’s export base and linked Africa more strongly to rapidly growing parts of the global economy. These changes will help reduce the volatility of exports and improve prospects for robust economic growth in Africa.

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Beyond Growth: the Importance of Inclusion


By Antoinette Sayeh

(Version in  Français)

Economists care about growth.  Governments care about what it can achieve:  more jobs and more income for more people.  An increasing number of African countries have been growing robustly for more than a decade. But while growth is a necessary condition for poverty reduction and employment creation, is it also sufficient?

When growth first takes off, it is typically associated with steady progress in several dimensions of poverty reduction: incomes rise and countries are able to finance more spending on health and education, which translates into much-needed progress toward the Millennium Development Goals. But after this initial spurt, other questions arise. In particular, a number of countries are increasingly concerned about how inclusive growth is; are the benefits well-spread or do they accrue only to the few? Continue reading

Raising Government Revenue in Africa: A Road out of Poverty


By Mark Plant

(Version in Français. Listen to the podcast in English or Français.)

Governments in Africa have a prime objective—to reduce poverty. To improve living standards and create jobs, they need to provide their citizens with better health care, better education, more infrastructure. They need to build hospitals, schools, and to pay doctors, nurses, teachers.

All this costs money. How to pay for this—in a way that is both fair and efficient—is a question that all governments face.

There are limits to how much a government can receive as grants from donors or borrow from donors or the private sector. So raising tax revenues is a necessary element for governments to spend on providing more of these essential services and, in turn, reduce poverty. Continue reading

Today’s Bounty, Tomorrow’s Promise: Better Policies to Manage Natural Resources


By Leslie Lipschitz

(Version in Español | Français | عربي )

Countries rich in natural resources are often looked at with envy: they face few financial constraints and that should speed their development path. But the reality is less rosy.
Countries with an abundance of natural resources—typically oil, gas or minerals—have, on average, performed less well than comparable non-resource rich countries.

That raises one of the perennial questions in economic policymaking. How to manage the economic and social challenges that stem from resource wealth? Or, to borrow the words of Professor Thorvaldur Gylfason (University of Iceland), how to prevent “nature’s bounty” from “becoming the curse of the common people”? Continue reading

Unlocking Central Asia’s Huge Potential


By Masood Ahmed

The IMF has just finished its Annual Meetings in Istanbul, the traditional start of the old silk road and the gateway to Central Asia. 

Strategically located between East Asia and Europe, and South Asia and Russia, Central Asia is rich in resources and faces tremendous opportunities—yet to be made the most of. Since the outset of their transition to a market economy, the countries of the region have made visible progress toward decentralizing their economies, creating market institutions, expanding international links, and intensifying efforts to diversify and increase production and trade. 

As a result—and owing also to sound macroeconomic management, high commodity prices, and strong foreign inflows—this landlocked region, the size of the European Union and home to 60 million people, enjoyed near double-digit growth on average during 2001–07. 

Oil wells in Baku, Azerbaijan: With global energy demand increasing again, Central Asia's energy exporters should see growth rates increase in 2010 (photo: David Mdzinarishvili /Reuters)

Oil wells in Baku, Azerbaijan: With global energy demand increasing again, Central Asia's energy exporters should see growth rates increase in 2010 (photo: David Mdzinarishvili /Reuters)

But, as elsewhere in the world, the global economic crisis has taken a toll on Central Asia, with average growth for the region as a whole sinking from 5.7 percent in 2008 to 1.2 percent in 2009. Nevertheless, this average masks important differences across countries. 

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