Description

This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of
 Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the
 risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public
 investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio.
 However, structural reforms that improve the efficiency of public investment can allow for a
 relatively faster buildup of sustainable public capital and sustain higher non-oil growth without
 adversely affecting the debt ratio or savings. Moreover, we show that even if a government
 pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of
 exhaustible and volatile resource revenues, low public investment quality in the form of a
 misallocation of resources can hinder attainment of sustainable public capital and positive non-oil
 growth.

More publications in this series: Working Papers

More publications by: Adrian Alter ; Matteo Ghilardi ; Dalia Hakura