Report | Overview | Charts and data
Two-thirds of emerging market and developing economies—and 90 percent of low-income countries—depend on commodity exports, leaving their public finances exposed to the boom-bust swings in global commodity prices. When commodity prices surge, spending typically rises in step; when they collapse, public services and investments are often cut, amplifying economic volatility and deepening the slump.
Drawing on the most comprehensive analysis to date of a large sample of commodity-exporting developing economies, this book reveals just how deeply these price swings shape government finances, and why some nations weather the cycle better than others. It also shows that governance, transparency, and implementation capacity often determine whether fiscal frameworks deliver lasting stabilization.
The book offers a practical roadmap for building fiscal resilience—through stronger fiscal frameworks and institutions, prudent saving during good times, and longer-term fiscal planning—while confronting the added uncertainty of the global energy transition. The rich menu of policy options outlined can help make public finances more resilient to shocks, reduce economic instability, and support more durable growth for commodity-dependent economies.
PRAISE FOR THE BOOK
"This important study is essential reading for researchers and policymakers on how commodity price volatility affects the fiscal positions of emerging market and developing economy (EMDE) commodity exporters. A key contribution is to show how the fiscal and growth implications differ across EMDE commodity exporters by export type—energy, agriculture, or metals—both in the short term and over longer periods of structural transformation. Some policy recommendations are general to any commodity exporter, such as mitigating fiscal volatility, strengthening fiscal frameworks, and building sovereign wealth funds—but the menu of specific policy options varies substantially across countries."
-- Warwick McKibbin, Non-Resident Senior Fellow, Peterson Institute for International Economics, and Emeritus Distinguished Professor, Australian National University
"Fiscal policy in many emerging market and developing economies tends to be procyclical and generates unnecessary business cycle volatility. But not all these economies face the same challenges, and finding the right policy recommendations requires a good understanding of the context in which fiscal policy is conducted. Commodity exporters are a large group of countries for which these perverse fiscal dynamics tend to be larger and are driven by distinct forces. This book provides a novel and thorough analysis of fiscal policy in commodity exporters. It produces a very large number of stylized facts about how fiscal policy is conducted in these economies and, more importantly, it translates that context into a series of policy recommendations. A must-read for anyone interested in fiscal policy in commodity-dependent economies."
-- Antonio Fatás, Professor of Economics, INSEAD, and Vice President, Centre for Economic Policy Research
"Commodity-exporting developing economies live on a fiscal roller coaster: revenues surge in booms, collapse in slumps, and public spending too often amplifies the ride. Drawing on evidence from nearly a hundred commodity exporters, this volume documents why fiscal policy in these economies remains procyclical and volatile, quantifies the costs for growth, and shows how the energy transition is reshaping fiscal risks for oil and metal exporters alike. Its message is ultimately constructive: the boom-bust pattern can be broken; fiscal frameworks anchored in credible rules, savings funds, and bold institutions allow governments to smooth the cycle rather than amplify it. This book is an indispensable guide for policymakers and essential reading for anyone concerned with macroeconomic stability in the developing world."
-- Francesco Zanetti, Professor of Economics and David Richards Fellow of Wadham College, University of Oxford
"This excellent new book by the World Bank is a timely and fresh addition to the literature on how commodity exporting countries should manage the inherent volatility in their primary source of income. Successfully managing the ups and downs of the commodity price cycle is essential for long-term economic growth and poverty reduction. The book’s focus on the costs of procyclical fiscal policy, the need to consider the energy transition and the growing demand for critical minerals in fiscal policy decisions, and the importance of strong institutions and frameworks in delivering sound fiscal policy outcomes are particularly important contributions."
-- Tim Callen, Visiting Fellow, Arab Gulf States Institute
"This volume tracing the path of fiscal dynamics in commodity-dependent countries offers strong evidence that agriculturally dependent EMDEs suffering from boom-and-bust price cycles are hard-pressed to deal with the resulting economic consequences. Unfortunately, it is precisely these countries that are among the poorest, also facing governance challenges and low productivity. For this reason, the usual admonition of creating more fiscal space is often difficult to achieve. Given heightened global uncertainty, rising debt levels, and trade disruptions, the fiscal challenges have never been more acute. The World Bank has produced a commendable body of work, supported by rigorous analysis, and offering some valuable and practical suggestions for this group of vulnerable economies. This is a volume well worth reading."
-- Danny Leipziger, Professor of International Business and International Affairs, George Washington University, and Managing Director of the Growth Dialogue
"Fiscal policy for commodity exports is key for good management of the resource revenues. And will be crucial for the critical minerals boom that are expected. This book gives a very useful analysis of good fiscal policy management for developing countries. Much to be recommended for both policy makers and academics."
-- Rick van der Ploeg, Professor of Economics, University of Oxford, and Research Director, Oxford Centre for Analysis of Resource Rich Economies
"The problem with commodities is not that their prices fluctuate, but how governments respond to those fluctuations. This book shows that in commodity-exporting developing countries, fiscal policy remains stubbornly procyclical. Governments also rely more heavily on resource revenues than on taxation, while spending less on growth-enhancing investments. The result is a toxic combination of volatile public spending, slower growth, rising debt, and too little economic diversification. This book shows that the resource curse is not inevitable. Fiscal institutions can “tie the government’s hands,” saving windfall revenues in good times and resisting the temptation to seize and spend the rents. These reforms are essential if the citizens of commodity-exporting countries are to benefit from their natural wealth. With the green-energy transition increasing the strategic importance of many commodities, the stakes have rarely been higher."
-- Shantayanan Devarajan, Professor of the Practice of International Development, Georgetown University
"Fiscal Policy in Commodity Exporters: A Balancing Act provides a timely and compelling analysis of one of the most persistent challenges in economic policy: how to transform volatile commodity revenues into stable and sustainable development. Combining rigorous cross-country evidence with practical policy guidance, the volume explains why fiscal procyclicality and volatility remain so difficult to overcome—and which institutions can make a difference. Its careful treatment of the energy transition makes the book especially valuable for countries confronting both new opportunities and profound fiscal risks. This will be an essential reference for researchers, policymakers, and anyone seeking to understand the economic consequences of commodity dependence."
-- Ugo Panizza, Pictet Chair in Finance and Development, Geneva Graduate Institute; and Vice President, Centre for Economic Policy Research