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Fiscal policy in commodity-exporting LDCs (English)

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  • Fiscal policy in commodity-exporting LDCs (English)
  • Cuddington, John
  • World Bank (WB)


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Title Fiscal policy in commodity-exporting LDCs (English)
Similar Titles
Material Type Reports
Author(English)

Cuddington, John

Publisher

World Bank (WB)

Date 1988
Language English
File Type Link
Subject Economy < Trade

Abstract

Revenues in countries that rely heavily on one or two primary commodities tend to fluctuate widely with prices in international markets. This fluctuation is especially wide when export taxes are a large part of the total tax base but also when the private sector reaps most of the gains from booming prices. Most developing countries have over consumed in response to windfalls from surges in world prices. In many cases government spending has outstripped the gain in revenues. These sharp increases in government spending are difficult to reverse when the boom ends and often lead to large fiscal deficits rather than surpluses. Several countries, however, whose policies emphasize conservative fiscal management, have generally benefitted from booms. Clearly, good fiscal control during periodic boom episodes enables these booms to temporarily accelerate the rate of economic development.