Harnessing Resource Wealth for Inclusive Growth in Fragile States

55 Pages Posted: 7 Mar 2015

See all articles by Corinne Deléchat

Corinne Deléchat

International Monetary Fund (IMF)

Shu-Chun Susan Yang

International Monetary Fund (IMF)

Will Clark

International Monetary Fund (IMF)

Pranav Gupta

International Monetary Fund (IMF)

Malangu Kabedi-Mbuyi

International Monetary Fund (IMF)

Mesmin Koulet-Vickot

Bank of Central African States

Carla Macario

United Nations - Economic Commission for Latin American and the Caribbean (ECLAC)

Toomas Orav

International Monetary Fund (IMF)

Manuel Rosales

International Monetary Fund (IMF)

Rene Tapsoba

International Monetary Fund (IMF)

Dmitry Zhdankin

International Monetary Fund (IMF)

Date Written: February 2015

Abstract

Like other fragile sub-Saharan African countries, Côte d’Ivoire, Guinea, Liberia, and Sierra Leone are seeking to harness their natural resource potential in the context of ambitious development strategies. This study investigates options for scaling up public investment and expanding social safety nets in a general equilibrium setting. First, it assesses the macro-fiscal implications of alternative fiscal rules for public investment, and, second, it explicitly accounts for redistribution through direct cash transfers. Results show that a sustainable non-resource deficit target is robust to the high uncertainty of resources output and prices, while delivering growth benefits through higher public investment. The scaling-up magnitudes, however, depend on the size of projected resource revenue and absorptive capacity. Adding a social transfer raises private consumption, suggesting that a fraction of the resource revenue could be used to expand safety nets.

Keywords: Natural resources, Guinea, Liberia, Sierra Leone, Inclusive growth, Social safety nets, Public investment, Fiscal policy, General equilibrium models, West Africa, fragile states, revenue, poverty, tax, share, debt, reserves, monetary fund, income tax, options, debt relief, deficit, revenues, deposits, human capital, transparency, future, cash transfers, market, government revenue, commodity prices, investments, developing countries, international capital, permanent income hypothesis, investors, market economies, expenditure, banking crises, auction, public debt, lending, international capital markets, accounting, finance, contracts, emerging market economies, political stability, oil reserve

JEL Classification: O11, O23, O41, O55, Q32

Suggested Citation

Deléchat, Corinne and Yang, Shu-Chun Susan and Clark, Will and Gupta, Pranav and Kabedi-Mbuyi, Malangu and Koulet-Vickot, Mesmin and Macario, Carla and Orav, Toomas and Rosales, Manuel and Tapsoba, Rene and Zhdankin, Dmitry, Harnessing Resource Wealth for Inclusive Growth in Fragile States (February 2015). IMF Working Paper No. 15/25, Available at SSRN: https://ssrn.com/abstract=2574697

Corinne Deléchat (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Shu-Chun Susan Yang

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Will Clark

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Pranav Gupta

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Malangu Kabedi-Mbuyi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mesmin Koulet-Vickot

Bank of Central African States ( email )

736 Av. Mgr. VOGT
BP 1917
Yaounde
Cameroon

Carla Macario

United Nations - Economic Commission for Latin American and the Caribbean (ECLAC) ( email )

United Nations
Casilla 179D International Trade and Development Finance Division CEPAL/ECLAC
Santiago
CHILE
(562) 210-2652 (Phone)
(562) 208-0252 (Fax)

Toomas Orav

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Manuel Rosales

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rene Tapsoba

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dmitry Zhdankin

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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