Fiscal Institutions in Resource-rich Economies

Abstract

Resource-rich economies in general, and Arab oil exporters in particular, are at a critical juncture, facing the challenge of revamping their fiscal policy institutions and conduct to strengthen macroeconomic and financial stability, raise growth, and improve intra/inter-generational equity. This paper starts by reviewing the international evidence on fiscal policies and outcomes in resource-rich economies at large and Arab oil-exporting countries in particular, which suggests that strong fiscal (and political) institutions can turn the resource curse into a blessing. Then the paper provides comparative reviews of Chile's and Norway's decade-long experience in setting up new fiscal institutions and rules to manage their resource rents, aiming at and, in fact, attaining more macroeconomic and financial stability, higher growth, and improved equity. Specific reform lessons to strengthen fiscal institutions and policies are drawn for resource-rich economies and Arab oil exporters.