Rolando Ossowski

Fiscal policy formulation and implementation in oil-producing countries

Countries with large oil resources can benefit substantially from them. However, despite their huge natural resources, many oil producers have had disappointing growth, widespread poverty, and continuing vulnerability to oil and other external shocks. Fiscal policy can play a central role in determining the extent to which a country benefits from its oil wealth. This book brings together studies that provide analysis and findings on fiscal policy issues in oil-producing countries from a diverse international perspective. A key focus for the authors has been on how to manage oil resources in a way that contributes to a stable macroeconomic environment, sustainable growth, and poverty reduction.

Operational Aspects of Fiscal Policy in Oil-Producing Countries

Oil-producing countries face challenges arising from the fact that oil revenue is exhaustible, volatile, and uncertain, and largely originates from abroad. Reflecting these challenges, the paper proposes some important general principles for the formulation and assessment of fiscal policy in these countries. The main findings can be summarized in some key guidelines: the non-oil balance should feature prominently in the formulation of fiscal policy; it should generally be adjusted gradually; the government should strive to accumulate substantial financial assets over the period of oil production; and, where necessary, strategies should aim at breaking procyclical fiscal responses to volatile oil prices.

Fiscal and Macroeconomic Impact of Privatization

Privatization has been a key element of structural reform in many developing and transition economies during the last decade. This paper examines the fiscal and macroeconomic issues involved in the privatization of nonfinancial public enterprises in these economies. It considers issues such as the factors determining the proceeds from privatization and the amount accruing to the budget, the uses of proceeds, the impact of privatization on the budget and macroeconomic aggregates, and the privatization component of IMF-supported programs. The empirical evidence draws on case study countries that reflect geographical diversity and are representative of a range of privatization experience in developing and transition economies.

Managing the Oil Revenue Boom; The Role of Fiscal Institutions

Oil-producing countries have benefited from rising oil prices in recent years. The increase in oil exports and oil revenues has had major implications for these countries. These developments have revealed how governments manage their fiscal policies in light of changing oil-market conditions and the role of special fiscal institutions (SFIs). In this Occasional Paper, IMF experts examine the fiscal response of oil-producing countries to the recent oil boom and the role of SFIs in fiscal management, they review the experiences of selected countries, and they draw general lessons. In doing so, they link findings on best practice in the design of SFIs with broader fiscal management advice.

Stabilization and Savings Funds for Nonrenewable Resources

This chapter examines whether funds can help countries pursue good macroeconomic, and especially fiscal policies, and consequent design issues. Nonrenewable resource funds (NRF) have been suggested as a way of dealing with the effects of price variability, making it easier to put revenues aside when prices are high so that they can be made available to maintain expenditures when prices are low. Funds may also serve as mechanisms to allow part of the nonrenewable resource wealth to be shared by future generations. A detailed evaluation of country experience suggests that NRFs have been associated with a variety of operating rules and fiscal policy experience. In several cases, rules have been bypassed or changed and they do not themselves seem to have effectively constrained spending, and the integration of the funds operations with overall fiscal policy has often proven problematic. Whether the political economy arguments for an NRF outweigh the potential disadvantages will need to be considered based on the situation in each country.

Shortages Under Free Prices: the Case of Ukraine in 1992

This paper examines whether shortages may occur in an economy in transition, even for goods whose prices are free. The empirical relevance of this phenomenon is suggested by a case study of Ukraine during 1992. The paper presents a model of enterprise behavior in an environment where key inputs are centrally allocated at preferential prices. It shows that the allocation of key inputs according to perceived need may create incentives for enterprises to perpetuate shortages, despite formal price liberalization. The analysis suggests that central allocation must be abolished for price liberalization to have its full efficiency effects.

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Poland: Stabilization, Transition, and Reform, 1990–91

The IMF played a critical role in supporting countries making the transition from central planning to the market economy in the 1990s. The main task was to help these countries restore and maintain macroeconomic and external stability while undergoing a radical reshaping of their economic institutions. The countries’ desire to change stemmed from the clear failure of the Communist system to deliver a satisfactory living standard for their citizens, especially when compared with the market economies of Western Europe. These failures both compounded the difficulties of transition and steeled the determination to face up to them.