How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/06/19737142/donors-respond-resource-windfalls-poor-countries-aid-insurance http://hdl.handle.net/10986/19372 |
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okr-10986-19372 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING AGRICULTURE ALLOCATION ALTERNATIVE SCENARIOS ARBITRAGE AVERAGE PRICE BALANCE OF PAYMENTS BANK ACCOUNT BENCHMARK BOND BOND MARKETS BONDS BOOM-BUST CYCLES BORROWER BROKER BROKERAGE BROKERS BUDGET PERFORMANCE CALL OPTION CALL OPTIONS CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CASH FLOW CASH FLOW RISK CASH FLOWS CASH RESERVES CLIMATE COLLATERAL COLLATERAL REQUIREMENTS COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICES COUNTRY RISK CREDIT EXPOSURE CREDIT GUARANTEE CREDIT LINE CREDIT RISK CREDIT RISKS CREDIT-WORTHINESS CREDITOR CREDITWORTHINESS DEFAULTS DEPOSITS DERIVATIVE DERIVATIVE TRANSACTIONS DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT POLICY DEVELOPMENT PROJECTS DISBURSEMENT DISBURSEMENTS DIVIDEND DIVIDENDS DRAWN DOWN DROUGHT INSURANCE ENTRY POINTS EXOGENOUS SHOCKS EXPECTED VALUE EXPENDITURE EXPENDITURES EXPORTER EXPORTERS EXPORTS EXPOSURE EXTERNAL SHOCKS EXTREME EVENTS FINANCIAL ASSISTANCE FINANCIAL CONTRACT FINANCIAL DEVELOPMENT FINANCIAL FLOWS FINANCIAL INSTRUMENTS FINANCIAL PRODUCTS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SUPPORT FINANCIAL TRANSFERS FISCAL POLICY FIXED INCOME FORMAL ANALYSIS FORWARD CONTRACT FORWARD CONTRACTS FUEL PRICES FUTURES FUTURES CONTRACT FUTURES CONTRACTS FUTURES MARKET FUTURES MARKETS GDP GLOBAL FUND GOVERNMENT POLICIES GOVERNMENT REVENUE GOVERNMENT SPENDING HEDGES IMPLIED VOLATILITY INCOME INSTRUMENTS INCOME TAX INCOMES INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTRINSIC VALUE INVESTING INVESTMENT MANAGEMENT INVESTMENT PROJECTS LEVEL OF COMMITMENTS LEVEL OF RISK LIABILITY LIQUIDITY LOAN LOAN AGREEMENTS LOCAL CURRENCY LOW-INCOME COUNTRIES LOWER PRICE MACROECONOMIC FLUCTUATIONS MACROECONOMIC LEVEL MACROECONOMIC POLICY MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MARGIN ACCOUNT MARGIN REQUIREMENTS MARKET CONDITIONS MARKET PRICE MARKET PRICES MATURITY MIDDLE INCOME COUNTRIES MONETARY FUND MORAL HAZARD MULTILATERAL DEVELOPMENT NATIONAL ACCOUNTS NATIONAL INCOME NATURAL DISASTERS NATURAL RESOURCE NATURAL RESOURCES NET COST OIL PRICE OIL PRICES OIL PRODUCTION OIL RESOURCE OIL SECTOR OUTPUT OUTPUT LOSS POLICY IMPLICATIONS PORTFOLIO POWER SECTOR PRESENT VALUE PRICE BAND PRICE BENCHMARKS PRICE CHANGES PRICE FLOOR PRICE INCREASES PRICE INSTABILITY PRICE LEVEL PRICE LEVELS PRICE MOVEMENTS PRICE OF OIL PRICE RISK PRICE RISKS PRICE TRENDS PRICE VARIATION PRICE VARIATIONS PRICE VOLATILITY PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PROBABILITY DENSITY PROBABILITY DISTRIBUTION PRODUCTION COSTS PUBLIC INVESTMENT PURCHASE PRICE PURCHASING PUT OPTION PUT OPTIONS RANDOM WALK REAL EXCHANGE RATE REINSURANCE RESERVE RESERVES RISK EXPOSURES RISK MANAGEMENT RISK NEUTRAL SAVINGS SCENARIOS SET ASIDE SINGLE CALL SPOT MARKET SPOT PRICE SPOT PRICES SUPPLY CONTRACT SWAPS TAX TAX REVENUES TAXATION TECHNICAL ASSISTANCE TOTAL COST TOTAL FACTOR PRODUCTIVITY TRADE DATE TRADES TRADING TRANSACTION TRANSACTION COST TRANSFER PRICE TREASURY VOLATILITIES WEALTH WORLD MARKET WORLD MARKETS WORST-CASE |
| spellingShingle |
ACCOUNTING AGRICULTURE ALLOCATION ALTERNATIVE SCENARIOS ARBITRAGE AVERAGE PRICE BALANCE OF PAYMENTS BANK ACCOUNT BENCHMARK BOND BOND MARKETS BONDS BOOM-BUST CYCLES BORROWER BROKER BROKERAGE BROKERS BUDGET PERFORMANCE CALL OPTION CALL OPTIONS CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CASH FLOW CASH FLOW RISK CASH FLOWS CASH RESERVES CLIMATE COLLATERAL COLLATERAL REQUIREMENTS COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICES COUNTRY RISK CREDIT EXPOSURE CREDIT GUARANTEE CREDIT LINE CREDIT RISK CREDIT RISKS CREDIT-WORTHINESS CREDITOR CREDITWORTHINESS DEFAULTS DEPOSITS DERIVATIVE DERIVATIVE TRANSACTIONS DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT POLICY DEVELOPMENT PROJECTS DISBURSEMENT DISBURSEMENTS DIVIDEND DIVIDENDS DRAWN DOWN DROUGHT INSURANCE ENTRY POINTS EXOGENOUS SHOCKS EXPECTED VALUE EXPENDITURE EXPENDITURES EXPORTER EXPORTERS EXPORTS EXPOSURE EXTERNAL SHOCKS EXTREME EVENTS FINANCIAL ASSISTANCE FINANCIAL CONTRACT FINANCIAL DEVELOPMENT FINANCIAL FLOWS FINANCIAL INSTRUMENTS FINANCIAL PRODUCTS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SUPPORT FINANCIAL TRANSFERS FISCAL POLICY FIXED INCOME FORMAL ANALYSIS FORWARD CONTRACT FORWARD CONTRACTS FUEL PRICES FUTURES FUTURES CONTRACT FUTURES CONTRACTS FUTURES MARKET FUTURES MARKETS GDP GLOBAL FUND GOVERNMENT POLICIES GOVERNMENT REVENUE GOVERNMENT SPENDING HEDGES IMPLIED VOLATILITY INCOME INSTRUMENTS INCOME TAX INCOMES INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTRINSIC VALUE INVESTING INVESTMENT MANAGEMENT INVESTMENT PROJECTS LEVEL OF COMMITMENTS LEVEL OF RISK LIABILITY LIQUIDITY LOAN LOAN AGREEMENTS LOCAL CURRENCY LOW-INCOME COUNTRIES LOWER PRICE MACROECONOMIC FLUCTUATIONS MACROECONOMIC LEVEL MACROECONOMIC POLICY MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MARGIN ACCOUNT MARGIN REQUIREMENTS MARKET CONDITIONS MARKET PRICE MARKET PRICES MATURITY MIDDLE INCOME COUNTRIES MONETARY FUND MORAL HAZARD MULTILATERAL DEVELOPMENT NATIONAL ACCOUNTS NATIONAL INCOME NATURAL DISASTERS NATURAL RESOURCE NATURAL RESOURCES NET COST OIL PRICE OIL PRICES OIL PRODUCTION OIL RESOURCE OIL SECTOR OUTPUT OUTPUT LOSS POLICY IMPLICATIONS PORTFOLIO POWER SECTOR PRESENT VALUE PRICE BAND PRICE BENCHMARKS PRICE CHANGES PRICE FLOOR PRICE INCREASES PRICE INSTABILITY PRICE LEVEL PRICE LEVELS PRICE MOVEMENTS PRICE OF OIL PRICE RISK PRICE RISKS PRICE TRENDS PRICE VARIATION PRICE VARIATIONS PRICE VOLATILITY PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PROBABILITY DENSITY PROBABILITY DISTRIBUTION PRODUCTION COSTS PUBLIC INVESTMENT PURCHASE PRICE PURCHASING PUT OPTION PUT OPTIONS RANDOM WALK REAL EXCHANGE RATE REINSURANCE RESERVE RESERVES RISK EXPOSURES RISK MANAGEMENT RISK NEUTRAL SAVINGS SCENARIOS SET ASIDE SINGLE CALL SPOT MARKET SPOT PRICE SPOT PRICES SUPPLY CONTRACT SWAPS TAX TAX REVENUES TAXATION TECHNICAL ASSISTANCE TOTAL COST TOTAL FACTOR PRODUCTIVITY TRADE DATE TRADES TRADING TRANSACTION TRANSACTION COST TRANSFER PRICE TREASURY VOLATILITIES WEALTH WORLD MARKET WORLD MARKETS WORST-CASE Dobronogov, Anton Gelb, Alan Brant Saldanha, Fernando How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| relation |
Policy Research Working Paper;No. 6952 |
| description |
Natural resources are being discovered
in more countries, both rich and poor. Many of the new and
aspiring resource exporters are low-income countries that
are still receiving substantial levels of foreign aid.
Resource discoveries open up enormous opportunities, but
also expose producing countries to huge trade and fiscal
shocks from volatile commodity markets if their exports are
highly concentrated. A large literature on the
"resource curse" shows that these are damaging
unless countries manage to cushion the effects through
countercyclical policy. It also shows that the countries
least likely to do so successfully are those with weaker
institutions, and these are most likely to remain as clients
of the aid system. This paper considers the question of how
donors should respond to their clients' potential
windfalls. It discusses several ways in which the focus and
nature of foreign aid programs will need to change,
including the level of financial assistance. The paper
develops some ideas on how a donor like the International
Development Association might structure its program of
financial transfers to mitigate volatility. The paper
outlines ways in which the International Development
Association could use hedging instruments to vary
disbursements while still working within a framework of
country allocations that are not contingent on oil prices.
Simulations suggest that the International Development
Association could be structured to provide a larger degree
of insurance if it is calibrated to hedge against large
declines in resource prices. These suggestions are intended
to complement other mechanisms, including self-insurance
using Sovereign Wealth Funds (where possible) and the
facilities of the International Monetary Fund. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Dobronogov, Anton Gelb, Alan Brant Saldanha, Fernando |
| author_facet |
Dobronogov, Anton Gelb, Alan Brant Saldanha, Fernando |
| author_sort |
Dobronogov, Anton |
| title |
How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| title_short |
How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| title_full |
How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| title_fullStr |
How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| title_full_unstemmed |
How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance |
| title_sort |
how should donors respond to resource windfalls in poor countries? from aid to insurance |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/06/19737142/donors-respond-resource-windfalls-poor-countries-aid-insurance http://hdl.handle.net/10986/19372 |
| _version_ |
1764443746197307392 |
| spelling |
okr-10986-193722021-04-23T14:03:51Z How Should Donors Respond to Resource Windfalls in Poor Countries? From Aid to Insurance Dobronogov, Anton Gelb, Alan Brant Saldanha, Fernando ACCOUNTING AGRICULTURE ALLOCATION ALTERNATIVE SCENARIOS ARBITRAGE AVERAGE PRICE BALANCE OF PAYMENTS BANK ACCOUNT BENCHMARK BOND BOND MARKETS BONDS BOOM-BUST CYCLES BORROWER BROKER BROKERAGE BROKERS BUDGET PERFORMANCE CALL OPTION CALL OPTIONS CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CASH FLOW CASH FLOW RISK CASH FLOWS CASH RESERVES CLIMATE COLLATERAL COLLATERAL REQUIREMENTS COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICES COUNTRY RISK CREDIT EXPOSURE CREDIT GUARANTEE CREDIT LINE CREDIT RISK CREDIT RISKS CREDIT-WORTHINESS CREDITOR CREDITWORTHINESS DEFAULTS DEPOSITS DERIVATIVE DERIVATIVE TRANSACTIONS DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT POLICY DEVELOPMENT PROJECTS DISBURSEMENT DISBURSEMENTS DIVIDEND DIVIDENDS DRAWN DOWN DROUGHT INSURANCE ENTRY POINTS EXOGENOUS SHOCKS EXPECTED VALUE EXPENDITURE EXPENDITURES EXPORTER EXPORTERS EXPORTS EXPOSURE EXTERNAL SHOCKS EXTREME EVENTS FINANCIAL ASSISTANCE FINANCIAL CONTRACT FINANCIAL DEVELOPMENT FINANCIAL FLOWS FINANCIAL INSTRUMENTS FINANCIAL PRODUCTS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SUPPORT FINANCIAL TRANSFERS FISCAL POLICY FIXED INCOME FORMAL ANALYSIS FORWARD CONTRACT FORWARD CONTRACTS FUEL PRICES FUTURES FUTURES CONTRACT FUTURES CONTRACTS FUTURES MARKET FUTURES MARKETS GDP GLOBAL FUND GOVERNMENT POLICIES GOVERNMENT REVENUE GOVERNMENT SPENDING HEDGES IMPLIED VOLATILITY INCOME INSTRUMENTS INCOME TAX INCOMES INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTRINSIC VALUE INVESTING INVESTMENT MANAGEMENT INVESTMENT PROJECTS LEVEL OF COMMITMENTS LEVEL OF RISK LIABILITY LIQUIDITY LOAN LOAN AGREEMENTS LOCAL CURRENCY LOW-INCOME COUNTRIES LOWER PRICE MACROECONOMIC FLUCTUATIONS MACROECONOMIC LEVEL MACROECONOMIC POLICY MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MARGIN ACCOUNT MARGIN REQUIREMENTS MARKET CONDITIONS MARKET PRICE MARKET PRICES MATURITY MIDDLE INCOME COUNTRIES MONETARY FUND MORAL HAZARD MULTILATERAL DEVELOPMENT NATIONAL ACCOUNTS NATIONAL INCOME NATURAL DISASTERS NATURAL RESOURCE NATURAL RESOURCES NET COST OIL PRICE OIL PRICES OIL PRODUCTION OIL RESOURCE OIL SECTOR OUTPUT OUTPUT LOSS POLICY IMPLICATIONS PORTFOLIO POWER SECTOR PRESENT VALUE PRICE BAND PRICE BENCHMARKS PRICE CHANGES PRICE FLOOR PRICE INCREASES PRICE INSTABILITY PRICE LEVEL PRICE LEVELS PRICE MOVEMENTS PRICE OF OIL PRICE RISK PRICE RISKS PRICE TRENDS PRICE VARIATION PRICE VARIATIONS PRICE VOLATILITY PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PROBABILITY DENSITY PROBABILITY DISTRIBUTION PRODUCTION COSTS PUBLIC INVESTMENT PURCHASE PRICE PURCHASING PUT OPTION PUT OPTIONS RANDOM WALK REAL EXCHANGE RATE REINSURANCE RESERVE RESERVES RISK EXPOSURES RISK MANAGEMENT RISK NEUTRAL SAVINGS SCENARIOS SET ASIDE SINGLE CALL SPOT MARKET SPOT PRICE SPOT PRICES SUPPLY CONTRACT SWAPS TAX TAX REVENUES TAXATION TECHNICAL ASSISTANCE TOTAL COST TOTAL FACTOR PRODUCTIVITY TRADE DATE TRADES TRADING TRANSACTION TRANSACTION COST TRANSFER PRICE TREASURY VOLATILITIES WEALTH WORLD MARKET WORLD MARKETS WORST-CASE Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. This paper considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance. The paper develops some ideas on how a donor like the International Development Association might structure its program of financial transfers to mitigate volatility. The paper outlines ways in which the International Development Association could use hedging instruments to vary disbursements while still working within a framework of country allocations that are not contingent on oil prices. Simulations suggest that the International Development Association could be structured to provide a larger degree of insurance if it is calibrated to hedge against large declines in resource prices. These suggestions are intended to complement other mechanisms, including self-insurance using Sovereign Wealth Funds (where possible) and the facilities of the International Monetary Fund. 2014-08-15T17:17:48Z 2014-08-15T17:17:48Z 2014-06 http://documents.worldbank.org/curated/en/2014/06/19737142/donors-respond-resource-windfalls-poor-countries-aid-insurance http://hdl.handle.net/10986/19372 English en_US Policy Research Working Paper;No. 6952 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |