Oil prices and the fiscal policy response in oilexporting. 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. Poverty is still widespread in a number of oilproducing countries. Oil exporters to continue coordination towards final market. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nations economy. The contribution of the oil sector to arab economic development by. 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. The implementation encloses all actions that take place during the realisation of the plans, i. The public policy formulation is part of the predecision. The fourth explores the broader economic and financial ramifications of the collapse in the price of oil.
Ilzetzki and vegh 2008, find, using instrumental variable regression, strong evidence of procyclical fiscal policy in developing countries. 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. 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. 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. Fiscal policy challenges in oilexporting countries arab. 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.
Policy instruments are often known as governing tools as well, particularly when they. The fiscal policy in developing countries should apparently be conducive to rapid economic development. 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. In oilproducing countries, a relatively small decline in oil prices leads to a. This paper empirically assesses the impact of oil price shocks on the underlying non oil economic cycle in oil exporting countries. The main findings can be summarized in some key guidelines. Oilproducing countries and the use of special fiscal institutions zmany opcs have had difficulties in addressing the challenges posed by dependence on oil revenues. It is the sister strategy to monetary policy through which a. Global energy supplies have recently failed to keep pace with constantly rising global demand for energy. 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. Policy makers, economists, and public finance professionals working in such. The exhaustibility and volatility of natural resource revenues pose wellknown economic challenges, of which those facing oil producers are the most prominent.
Fiscal policy and economic cycles in oilexporting countries. Hence, the analysis needs to incorporate an osf and an osf allocation rule. Oil rents and economic growth in oil producing countries. Policy formulation and implementation 1 portal written. It has a tough role to play in a developing economy and has to face the problem of growthcumstability. 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. Past fiscal policy in nigeria has not been successful in this regard, since both revenue and expenditure have been highly. The intention in policy formulation is reflected in policy implementation through instrument. Policy instrument an overview sciencedirect topics. Read fiscal policy formulation and implementation in oil producing countries by jeffrey mr. 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 in oil producing countries during the recent. However, at many stages of the policy formulation, input is sought from the reserve bank.
In the mid1800s, kerosene produced from refined crude oil begins to make its way onto the market in. A survey of environmentally relevant clauses the oil and gas industry faces increasingly strict environmental standards in developed countries. Eduardo engel and rodrigo valdes latin american and. This harmonisation of policies is enacted in the rbf act and is effected through a number of institutional. Policy formulation and implementation 6 portal written material implementation is normally regarded as a vital and often neglected phase of strategic planning. Imf operational work includes technical assistance for timorleste, a conference on fiscal policy in oilproducing countries. However, despite their huge natural resources, many oil producers have had disappointing growth, widespread poverty, and. Resourcerich countries often face three major macroeconomic challenges. Policy formulation clearly is a critical phase of the policy process which also is an explicit subject of policy design. 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. The extractive industries ei sector occupies an outsize space in the economies of many developing countries. 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. The role of fiscal institutions in managing the oil revenue boom. Implementation in oil producing countries, washington, d.
Operational aspects of fiscal policy in oilproducing. Measuring fiscal performance in oilproducing countries. Jul 31, 2014 liuksila c, garcia a, bassett s 1994 fiscal policy sustainability in oil producing countries. Development partners have little direct leverage on oilexporting countries, but can help through. The role of national oil companies in international. Besides, almost all of the countries that have signed loanfor oil deals with china are projected to suffer significant declines in oil production during the period leading up to 2035. Fiscal policy in oilproducing countries can be profoundly affected by oil revenue uncertainty and volatility. 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. Attitudes, social values and norms of the top management. Paper prepared for imf conference on fiscal policy formulation and implementation in oil producing countries, june 56, 2002. 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.
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. 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. Process of public policy formulation in developing countries. Fiscal adjustment in nonoil producing mena countries. Fiscal breakeven oil prices council on foreign relations. Their study showed that resourcedependent economies tend to grow more slowly than nonresourcedependent ones at comparable levels of development. Fiscal policy can play a central role indetermining the extent to which a country benefits from its oil wealth. Reflecting these challenges, the paper proposes some important general principles for the formulation and assessment of fiscal policy in these countries. Many estimate oil sands place the countrys oil reserves pdf second to saudi arabia. Governments in each of these countries must look beyond the global crisis and make courageous tradeoffs to ensure a sustainable future for public finances. Recently it has become popular among oilproducing countries to establish oil revenue funds, which are believed.
Fiscal vulnerability to resourceprice reversals fiscal positions are often vulnerable to reversals after price booms in resourcerich economies. This book brings together studies that provide analysis and findings on fiscal policy issues in oilproducing countries from a diverse international perspective. 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. Download it once and read it on your kindle device, pc, phones or tablets. 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 paper presents numerical simulations of various fiscal rules for oil producing countries. An overview jeffrey davis, rolando ossowski, and annalisa fedelino. In a poor country, fiscal policy can no longer remain a compensatory fiscal policy. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non oil growth prospects. The political economy of fiscal policy and economic. Promotion of mutual investments between oil producing and. Davis, ossowski, and fedelino 2003 looked at fiscal policy formulation and implementation in oilproducing countries. Bhola 2004 suggests that policy implementation is a process to actualise, apply and.
Fiscal policy formulation and implementation in oil. Fiscal policy can play a central role in determining the extent to which a country benefits from its oil wealth. Do phu hai, faculty of public policy graduate academy of social science gass, vietnam abstract. The western iocs now control less than 10% of the worlds oil and gas resource base. A government in deficit can face pressure to raise. 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. Of the top 20 oil producing companies in the world, 14 are nocs or newly privatized nocs.
Fall in oil prices poses a problem for russia, iraq and others. Introduction fiscal policy formulation and implementation in oilproducing countries was edited by j. Stabilization and savings funds for nonrenewable resources. Lee fiscal policy formulation and implementation in oilproducing countries por jeffrey mr. Oilproducing country stabilization fund abstract setting an optimal. Fiscal policy formulation and implementation in oilproducing. We refer to this problem as the optimal consumption problem. Also, the implementation of the local content development policy may be. Policy instrument is a linkage between policy formulation and policy implementation. Uvadare digital academic repository how to of fiscal. However, despite their huge natural resources, many oil producers have. Fiscal policy in oil producing countries during the recent oil price cycle. Nigerian content policy in the oil and gas industry.
Operational aspects of fiscal policy in oilproducing countries. Effectiveness in this context means whether the national fund helps to stabilize government expenditure and reer. Process of public policy formulation in developing countries prof. Finalized in 2007, the project explores the influence of emerging national oil companies and partially privatized national oil companies on international energy markets. Policy formulation should factor in the exhaustibility of the natural resources and aim at reducing oil revenue volatility passed on to the economy. Balassone, 2006, kia, 2008 that oilproducing countries are unique in the sense that the fiscal policy in these countries is affected by the. This paper presents a detailed analysis of the average fiscal policy responses of oil producing countries opcs to the recent oil price cycle.
Economic and financial resources available to it at a particular point of time. From a shortrun perspective, the nonoil balance is a key indicator of government demand on the economy. The united states dependence on oil has long influenced its foreign policy. World bank, petroleum revenue management workshop proceedings, 2004. Use features like bookmarks, note taking and highlighting while reading fiscal policy formulation and. 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. The distribution of non oil wealth is important for countries with relatively low oil reserves.
A primer on fiscal analysis in oilproducing countries. This book brings together studies that provide analysis and findings on fiscal policy issues in oil producing countries from a diverse international perspective. Fiscal policy formulation and implementation in oil producing. 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. Dutch disease, short to mediumterm procyclical fiscal policy and longrun boombust cycles. The basic factors that influence policy formulation are. In fiscal policy formulation and implementation in oilproducing countries, ed.
The ppam programme includes in addition to some of the above policy analysis, policy implementation. Use the free adobe acrobat reader to view pdf files. The third analyses oil firms responses to lower oil prices against the backdrop of high debt. In terms of current world oil production, nocs also dominate.
Read fiscal policy formulation and implementation in oilproducing countries by jeffrey mr. 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. 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. While no single growth and development pattern or policy fix is suit able for. Factors influencing policy formulation and decision. The fiscal management of natural resource revenues in a developing country setting english abstract. Countries with large oil resources can benefit substantially from them. Fiscal policy formulation and implementation in oilproducing countries kindle edition by davis, jeffrey m. The fiscal management of natural resource revenues in a. 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. Operational aspects of fiscal policy in oilproducing countries october 2002. Is fiscal policy procyclical in developing oilproducing. Introduction man as an individual and in society is a being of social nature.
This article aims at determining the impact of various components of fiscal policy on the nigerian economy. 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. Non oil producing countries in the middle east and north africa have spent the last decade working to achieve fiscal consolidation. During peak production on a new mine or oil or gas field, usually several years after production starts, a government may be flooded with a sudden cash windfall. Prepared by mauricio villafuerte and pablo lopezmurphy1. 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. 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. The political economy of fiscal policy and economic management. How to of fiscal sustainability in oilrich countries.