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We examine the existing fiscal policy paradigm in commodity-exporting countries. First, we argue that its centerpiece—the permanent income hypothesis (PIH)—is not consistent with either intergenerational equity or long-term sustainability in the presence of uncertainty. Policies to achieve these goals need to be more prudent and better anchored than the PIH. Second, we point out the presence of a volatility tradeoff between government spending and wealth and re-assess long-held views on the appropriate fiscal anchors, the vice of procyclicality, and the (im)possibility of simultaneously smoothing consumption and ensuring intergenerational equity and sustainability. Finally, we propose what we call a prudent wealth stabilization policy that would be more consistent with long-term fiscal policy goals, yet relatively simple to implement and communicate.

Fiscal policy. --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Government policy --- Investments: Stocks --- Macroeconomics --- Public Finance --- Fiscal Policy --- Fiscal Policies and Behavior of Economic Agents: General --- Resource Booms --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy: Demand and Supply --- Prices --- National Government Expenditures and Related Policies: General --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Public finance & taxation --- Investment & securities --- Consumption --- Oil prices --- Expenditure --- Stocks --- Fiscal policy --- National accounts --- Financial institutions --- Economics --- Expenditures, Public --- United Arab Emirates

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Nearly all countries in the Middle East and Central Asia have pledged to contain greenhouse gas emissions as part of the Paris Agreement. The purpose of this paper is to identify the menu of fiscal policy options which would allow the region to fulfil its emissions reduction commitment. Specifically, the paper examines and estimates the tradeoff between two broad categories of fiscal policies: public investments in renewable sources of energy and measures that raise the effective price of fossil fuels. Such a dichotomy captures the key medium-term macroeconomic and long-term intergenerational trade-offs that are arguably the most pertinent for the countries in the Middle East and Central Asia where governments are likely to play a leading role in the low-carbon transition. At one end of this tradeoff, a gradual removal of all fuel subsidies and, in addition, a phased introduction of a carbon tax of $8 per metric-ton of CO2-equivalent in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and $4 in the Caucasus and Central Asia (CCA) over the next eight years could achieve the region’s 2030 emissions abatement goals without additional investments in renewables. T Alternatively, additional combined public investments of close to US$900 billion in renewable sources of energy between 2023 and 2030 would allow achieving the region’s emissions reduction targets with fuel subsidies reduced by two thirds and without any carbon tax. In practice, most countries are likely to choose a mix of these policies based on their individual circumstances. Importantly, the deployment of non-fiscal mitigation policies—such as tightening of environmental regulations, such as raising emissions standards, or incentivizing green private investments—could play an important role in reducing the required fiscal effort and improving the tradeoff described above. Global and regional initiatives to provide affordable financial support and technological assistance would be equally important in improving the region’s economic options. Regardless of the chosen strategy, delaying the rollout of mitigation policies would make achieving the emissions reduction targets more difficult and costly. Therefore, an early start will be essential to tread a smoother path toward a low-carbon future in the Middle East and Central Asia.

Fiscal policy. --- Environmental economics. --- Economics --- International agencies --- International Agreements and Observance --- International Economics --- International institutions --- International organization --- International Organizations --- Political Economy --- Political economy --- Public Policy

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This study analyzes key issues associated with large increases in aid, including absorptive capacity, Dutch disease, and inflation. The authors develop a framework that emphasizes the different roles of monetary and fiscal policy and apply it to the recent experience of five countries: Ethiopia, Ghana, Mozambique, Tanzania, and Uganda. These countries have often found it difficult to coordinate monetary and fiscal policy in the face of conflicting objectives, notably to spend the aid money on domestic goods and to avoid excessive exchange rate appreciation.

Absorptive capacity (Economics) --- Economic assistance --- Dépenses publiques --- Capacité d'absorption (Économie politique) --- Aide économique --- Government spending policy --- Expenditures, Public --- Public spending policy --- Spending policy, Government --- Economic policy --- Finance, Public --- Full employment policies --- Unfunded mandates --- Economic aid --- Foreign aid program --- Foreign assistance --- Grants-in-aid, International --- International economic assistance --- International grants-in-aid --- International economic relations --- Conditionality (International relations) --- Capacity, Absorptive (Economics) --- Capital --- Economic development --- Investments, Foreign --- Loans, Foreign --- Politique gouvernementale --- Government policy --- Banks and Banking --- Foreign Exchange --- Inflation --- Investments: General --- Public Finance --- National Government Expenditures and Related Policies: General --- Price Level --- Deflation --- General Financial Markets: General (includes Measurement and Data) --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Currency --- Foreign exchange --- Macroeconomics --- Public finance & taxation --- Banking --- Investment & securities --- Real exchange rates --- Expenditure --- Treasury bills and bonds --- Monetary base --- Prices --- Financial institutions --- Money --- Government securities --- Money supply --- Ghana

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The oil market is undergoing fundamental change. New technologies are increasing the supply of oil from old and new sources, while rising concerns over the environment are seeing the world gradually moving away from oil. This spells a significant challenge for oil-exporting countries, including those of the Gulf Cooperation Council (GCC) who account for a fifth of the world’s oil production. The GCC countries have recognized the need to reduce their reliance on oil and are all implementing reforms to diversify their economies as well as fiscal and external revenues. Nevertheless, as global oil demand is expected to peak in the next two decades, the associated fiscal imperative could be both larger and more urgent than implied by the GCC countries’ existing plans.

Commodities --- Conservation of the environment --- Consumption --- Economics --- Energy conservation --- Energy: Demand and Supply --- Energy: General --- Energy: Government Policy --- Environment --- Environmental Conservation and Protection --- Finance --- Fiscal consolidation --- Fiscal Policy --- Fiscal policy --- Fiscal stance --- Fiscal sustainability --- Investment & securities --- Investments: Energy --- Investments: Futures --- Macroeconomics --- Macroeconomics: Consumption --- National accounts --- Oil consumption --- Oil prices --- Oil --- Petroleum industry and trade --- Prices --- Saving --- Wealth --- Saudi Arabia

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The Future of Oil and Fiscal Sustainability in the GCC Region.

Petroleum industry and trade --- Pétrole --- Industrie et commerce --- Arab countries. --- Saudi Arabia