What is it about?
This is the first paper that establishes fiscal rules for natural disaster-prone countries. The Pacific Islands are vulnerable to natural disasters, climate change, commodity price changes, and uncertain donor grants. How should small developing countries formulate a fiscal policy to achieve economic stability and fiscal sustainability when prone to various shocks?
Featured Image
Why is it important?
Our fiscal policy framework is practically applicable for many developing countries facing increasing frequency and impact of natural disasters and climate change. Our rules-based fiscal framework is crucial for sustainable and countercyclical macroeconomic policies to build resilience against devastating natural hazards.
Perspectives
Our study finds the advantages of a recurrent expenditure rules based on non-resource and non-grant revenue, interdependently determined by government debt and budget balance targets with expected disaster shocks. This paper contributes to the literature and policy dialogue by theoretically analyzing the impact of natural disasters on debt sustainability and proposing fiscal rules against natural disasters and climate changes.
Dr. Ryota Nakatani
International Monetary Fund
Read the Original
This page is a summary of: A Possible Approach to Fiscal Rules in Small Islands — Incorporating Natural Disasters and Climate Change, IMF Working Paper, September 2019, International Monetary Fund,
DOI: 10.5089/9781513511047.001.
You can read the full text:
Contributors
The following have contributed to this page
