Future Fiscal Adjustments and Debt Sustainability

Razzak, Weshah (2020): Future Fiscal Adjustments and Debt Sustainability.

Abstract

We estimate a VAR, which summarizes the dynamics of five variables, the real price of oil, the long-run real interest rate, real GDP, the primary fiscal balance-GDP, and debt-GDP. We make dynamic stochastic projections and use the data to compute the annual primary fiscal balance required to achieve a particular debt-GDP target over the period from the end of the sample in 2018 to 2024. For Oman to achieve a debt-GDP target between 60 to 20 percent in 2024, it has to increase its annual primary fiscal balance by about OR 4 Billion (USD 10.4 Billion) either by increasing revenues, decrease expenditures, or both. This figure increases substantially if Oman wants to achieve the target earlier than 2024.

• Item Type: MPRA Paper
• Language: English
• Keywords: External debt, fiscal balance, fiscal adjustment
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt

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