Macroeconomic impacts of non-resource revenue mobilization in CEMAC

ABSTRACT

This letter investigates main macroeconomic impacts of enhanced non-resource revenue mobilization in Africa’s CEMAC region. Model simulations indicate that non-oil revenue mobilization reduces debt and increases non-resource output in the long term. The mobilization, however, triggers an output decline in the short run and carries undesirable distributional effects. Cash transfers targeting the most vulnerable perform better than untargeted public investments to mitigate such increased inequality.

KEYWORDS:

• Revenue mobilization
• natural resources
• cash transfers
• inequality
• CEMAC

JEL CLASSIFICATION:

• E62
• H21
• O13
• C68
• D63
• I38

Acknowledgments

We would like to thank Alex Segura-Ubiergo and Joel Toujas-Bernate for helpful comments. Mathilde Perinet provided excellent research assistance. This paper is based on the analysis conducted for Box 2.2 of International Monetary Fund (IMF) (2018a). It is part of a research project on macroeconomic policy in low-income countries supported by the U.K.'s Department for International Development (DFID, project ID: 60925, IATI Identifier: GB-1-202960). The views expressed in this paper are those of the authors and do not necessarily represent the views of the International Monetary Fund (IMF), its Executive Board, IMF management, or the DFID.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See Pritchett (2000), Esfahani and Ramirez (2003), Lledó and Poplawski-Ribeiro (2013), Guerguil, Poplawski-Ribeiro, and Shabunina (2014), and Araujo et al. (2016) for discussions on public investment inefficiencies and absorptive capacity in developing economies.

² Data available upon request.

³ Given the impact of fiscal sustainability on CEMAC monetary union’s external stability, CEMAC averages usage is common in the literature (Araujo et al. 2016). Results are similar for the largest and most representative CEMAC countries.