Harnessing Resource Wealth for Inclusive Growth in Fragile States
55 Pages Posted: 7 Mar 2015
Date Written: February 2015
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: Suggested Citation