Small Countries with Volatile Revenue : Botswana and Bhutan
Bhutan and Botswana share a number of similarities. The two countries, land locked small states, have grown rapidly over the past few decades, boosted by sustained, large-scale inflows of foreign exchange. Botswana’s annual real growth rate average...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/07/24788392/small-countries-volatile-revenue-botswana-bhutan http://hdl.handle.net/10986/22394 |
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okr-10986-22394 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
TARIFFS GOVERNMENT SAVINGS MONETARY POLICY DEFICIT HOLDING REGULATORY FRAMEWORK GOVERNMENT EXPENDITURES ACCOUNTING LEGAL AGREEMENTS SHORT-TERM INTEREST RATES STOCK BANK RATE MACROECONOMIC MISMANAGEMENT MACROECONOMIC MANAGEMENT INTEREST GUARANTEES INVESTMENT FUND INTEREST RATE EXCHANGE BALANCE OF PAYMENTS MACROECONOMIC POLICY RESERVE REQUIREMENTS LIQUIDITY DEVELOPING COUNTRIES GOVERNMENT BORROWING POLITICAL ECONOMY REVENUES PORTFOLIO FISCAL POLICY BONDS DEVALUATION MACROECONOMIC CONDITIONS LOAN DISCOUNT TAX INCOME TAX BUDGETING RESERVE GOVERNMENT GUARANTEES INFLATION INSTRUMENTS BOOM-BUST CYCLE CREDIBILITY BUDGET CENTRAL BANK WITHDRAWALS MACROECONOMIC STABILITY POLICY RESPONSE LABOR MARKET INVESTMENT SPENDING INDEBTEDNESS BENEFICIARY CURRENCY EXPORT GROWTH DISBURSEMENT MARKET PRACTICE PORTFOLIOS GOVERNMENT INDEBTEDNESS INCOME INEQUALITY INFLATIONARY PRESSURES BOOM-BUST CYCLES DIVIDEND PAYMENT TRADING INTEREST RATES MONETARY FUND INVESTMENT FUNDS DEBT INFLATIONARY PRESSURE FINANCIAL FLOWS INFLATION RATE SALES AGREEMENT PUBLIC FINANCE LONG-TERM INSTRUMENTS CURRENT ACCOUNT TRANSACTIONS EXCESS LIQUIDITY INCOME LEVELS DOMESTIC DEBT LOANS RESERVES PRIVATE CAPITAL DEBT SERVICE FINANCIAL SYSTEM RECURRENT EXPENDITURE MONETARY AUTHORITY LEGAL FRAMEWORK FINANCE BANK POLICY PUBLIC INVESTMENT TAXES FIXED EXCHANGE RATE EXPENDITURE TRANSACTIONS INFRASTRUCTURE INVESTMENT AUCTIONS EQUITY CREDIT EXPANSION MACROECONOMIC ENVIRONMENT MACROECONOMIC INSTABILITY HUMAN CAPITAL CAPITAL OUTLAYS GOOD GOVERNMENT BUDGET FINANCIAL CRISIS FUTURE CREDIT EXPANSIONS RETURNS CAPACITY CONSTRAINTS TREASURY BILLS GOVERNMENT EXPENDITURE INTEREST PAYMENT LOCAL BUSINESSES PRICE STABILITY REPAYMENT FINANCIAL PERFORMANCE GOVERNMENT REVENUE EXPENDITURES AMORTIZATION LIQUIDITY MANAGEMENT CURRENT ACCOUNT DEFICIT SHARES HUMAN CAPITAL DEVELOPMENT REAL EXCHANGE RATE MARKET FOREIGN EXCHANGE TRADE LIBERALIZATION INVESTMENT POLICY PUBLIC DEBT BALANCE OF PAYMENT TREASURY SOLVENCY CURRENCIES ECONOMIC DEVELOPMENT INVESTMENT RATES OPEN MARKET GOODS SECURITY INVESTMENT DEBT SERVICES SHARE POVERTY FINANCIAL RISKS CAPITAL REQUIREMENT DEBT SERVICE PAYMENTS FINANCIAL ASSETS BID CAPITAL INFLOWS REVENUE EXTERNAL DEBT PROFIT INVESTMENTS LENDING DEBT REPAYMENT CHECK TRUST FUND CREDIT GROWTH MACROECONOMIC POLICIES REPOS EXCHANGE RATE FISCAL DISCIPLINE GOVERNMENT INVESTMENT INSTRUMENT DEBT SERVICING PROFITS LIABILITIES COMMODITY PRICES SHORT-TERM LIQUIDITY LONG-TERM ASSETS DEVELOPMENT BANK HUMAN DEVELOPMENT INVESTING |
| spellingShingle |
TARIFFS GOVERNMENT SAVINGS MONETARY POLICY DEFICIT HOLDING REGULATORY FRAMEWORK GOVERNMENT EXPENDITURES ACCOUNTING LEGAL AGREEMENTS SHORT-TERM INTEREST RATES STOCK BANK RATE MACROECONOMIC MISMANAGEMENT MACROECONOMIC MANAGEMENT INTEREST GUARANTEES INVESTMENT FUND INTEREST RATE EXCHANGE BALANCE OF PAYMENTS MACROECONOMIC POLICY RESERVE REQUIREMENTS LIQUIDITY DEVELOPING COUNTRIES GOVERNMENT BORROWING POLITICAL ECONOMY REVENUES PORTFOLIO FISCAL POLICY BONDS DEVALUATION MACROECONOMIC CONDITIONS LOAN DISCOUNT TAX INCOME TAX BUDGETING RESERVE GOVERNMENT GUARANTEES INFLATION INSTRUMENTS BOOM-BUST CYCLE CREDIBILITY BUDGET CENTRAL BANK WITHDRAWALS MACROECONOMIC STABILITY POLICY RESPONSE LABOR MARKET INVESTMENT SPENDING INDEBTEDNESS BENEFICIARY CURRENCY EXPORT GROWTH DISBURSEMENT MARKET PRACTICE PORTFOLIOS GOVERNMENT INDEBTEDNESS INCOME INEQUALITY INFLATIONARY PRESSURES BOOM-BUST CYCLES DIVIDEND PAYMENT TRADING INTEREST RATES MONETARY FUND INVESTMENT FUNDS DEBT INFLATIONARY PRESSURE FINANCIAL FLOWS INFLATION RATE SALES AGREEMENT PUBLIC FINANCE LONG-TERM INSTRUMENTS CURRENT ACCOUNT TRANSACTIONS EXCESS LIQUIDITY INCOME LEVELS DOMESTIC DEBT LOANS RESERVES PRIVATE CAPITAL DEBT SERVICE FINANCIAL SYSTEM RECURRENT EXPENDITURE MONETARY AUTHORITY LEGAL FRAMEWORK FINANCE BANK POLICY PUBLIC INVESTMENT TAXES FIXED EXCHANGE RATE EXPENDITURE TRANSACTIONS INFRASTRUCTURE INVESTMENT AUCTIONS EQUITY CREDIT EXPANSION MACROECONOMIC ENVIRONMENT MACROECONOMIC INSTABILITY HUMAN CAPITAL CAPITAL OUTLAYS GOOD GOVERNMENT BUDGET FINANCIAL CRISIS FUTURE CREDIT EXPANSIONS RETURNS CAPACITY CONSTRAINTS TREASURY BILLS GOVERNMENT EXPENDITURE INTEREST PAYMENT LOCAL BUSINESSES PRICE STABILITY REPAYMENT FINANCIAL PERFORMANCE GOVERNMENT REVENUE EXPENDITURES AMORTIZATION LIQUIDITY MANAGEMENT CURRENT ACCOUNT DEFICIT SHARES HUMAN CAPITAL DEVELOPMENT REAL EXCHANGE RATE MARKET FOREIGN EXCHANGE TRADE LIBERALIZATION INVESTMENT POLICY PUBLIC DEBT BALANCE OF PAYMENT TREASURY SOLVENCY CURRENCIES ECONOMIC DEVELOPMENT INVESTMENT RATES OPEN MARKET GOODS SECURITY INVESTMENT DEBT SERVICES SHARE POVERTY FINANCIAL RISKS CAPITAL REQUIREMENT DEBT SERVICE PAYMENTS FINANCIAL ASSETS BID CAPITAL INFLOWS REVENUE EXTERNAL DEBT PROFIT INVESTMENTS LENDING DEBT REPAYMENT CHECK TRUST FUND CREDIT GROWTH MACROECONOMIC POLICIES REPOS EXCHANGE RATE FISCAL DISCIPLINE GOVERNMENT INVESTMENT INSTRUMENT DEBT SERVICING PROFITS LIABILITIES COMMODITY PRICES SHORT-TERM LIQUIDITY LONG-TERM ASSETS DEVELOPMENT BANK HUMAN DEVELOPMENT INVESTING Kojo, Naoko C. Small Countries with Volatile Revenue : Botswana and Bhutan |
| geographic_facet |
Bhutan Botswana |
| description |
Bhutan and Botswana share a number of
similarities. The two countries, land locked small states,
have grown rapidly over the past few decades, boosted by
sustained, large-scale inflows of foreign exchange.
Botswana’s annual real growth rate averaged 9 percent over
the past 40 years, driven by diamond exploration, whereas
Bhutan has taken full advantage of generous foreign aid
inflows to achieve an average growth rate of 8 percent per
year for the past 30 years. However, after decades of rapid
growth, the production base of both countries remains very
narrow and the economy continues to directly or indirectly
dependent on government demand. Job creation, particularly
for the youths, is an important policy issue. Despite these
similarities, Bhutan and Botswana exhibit an interesting
contrast with regard to the management of volatile foreign
exchange inflows, and its macroeconomic consequences.
Notwithstanding the serious impact of the recent global
crisis, today Botswana’s external position remains solid,
guarded by sizable international reserves and low external
debt. In contrast, Bhutan has accumulated large external
debt and its international reserves are under significant
pressure. This paper discusses Bhutan and Botswana’s
experiences with managing volatile foreign exchange inflows.
It assesses the nature and domestic economic consequences of
volatile flows, and analyzes the policy measures that have
been used to respond to revenue volatility. The structure of
the paper is as follows. Section two analyzes Botswana’s
experience of managing large, volatile diamond export
earnings. Section three reviews more recent experience of
Bhutan. Section four draws policy lessons from the
experience of two countries. Finally section five concludes
the paper. |
| format |
Working Paper |
| author |
Kojo, Naoko C. |
| author_facet |
Kojo, Naoko C. |
| author_sort |
Kojo, Naoko C. |
| title |
Small Countries with Volatile Revenue : Botswana and Bhutan |
| title_short |
Small Countries with Volatile Revenue : Botswana and Bhutan |
| title_full |
Small Countries with Volatile Revenue : Botswana and Bhutan |
| title_fullStr |
Small Countries with Volatile Revenue : Botswana and Bhutan |
| title_full_unstemmed |
Small Countries with Volatile Revenue : Botswana and Bhutan |
| title_sort |
small countries with volatile revenue : botswana and bhutan |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2015/07/24788392/small-countries-volatile-revenue-botswana-bhutan http://hdl.handle.net/10986/22394 |
| _version_ |
1764450999615881216 |
| spelling |
okr-10986-223942021-04-23T14:04:08Z Small Countries with Volatile Revenue : Botswana and Bhutan Kojo, Naoko C. TARIFFS GOVERNMENT SAVINGS MONETARY POLICY DEFICIT HOLDING REGULATORY FRAMEWORK GOVERNMENT EXPENDITURES ACCOUNTING LEGAL AGREEMENTS SHORT-TERM INTEREST RATES STOCK BANK RATE MACROECONOMIC MISMANAGEMENT MACROECONOMIC MANAGEMENT INTEREST GUARANTEES INVESTMENT FUND INTEREST RATE EXCHANGE BALANCE OF PAYMENTS MACROECONOMIC POLICY RESERVE REQUIREMENTS LIQUIDITY DEVELOPING COUNTRIES GOVERNMENT BORROWING POLITICAL ECONOMY REVENUES PORTFOLIO FISCAL POLICY BONDS DEVALUATION MACROECONOMIC CONDITIONS LOAN DISCOUNT TAX INCOME TAX BUDGETING RESERVE GOVERNMENT GUARANTEES INFLATION INSTRUMENTS BOOM-BUST CYCLE CREDIBILITY BUDGET CENTRAL BANK WITHDRAWALS MACROECONOMIC STABILITY POLICY RESPONSE LABOR MARKET INVESTMENT SPENDING INDEBTEDNESS BENEFICIARY CURRENCY EXPORT GROWTH DISBURSEMENT MARKET PRACTICE PORTFOLIOS GOVERNMENT INDEBTEDNESS INCOME INEQUALITY INFLATIONARY PRESSURES BOOM-BUST CYCLES DIVIDEND PAYMENT TRADING INTEREST RATES MONETARY FUND INVESTMENT FUNDS DEBT INFLATIONARY PRESSURE FINANCIAL FLOWS INFLATION RATE SALES AGREEMENT PUBLIC FINANCE LONG-TERM INSTRUMENTS CURRENT ACCOUNT TRANSACTIONS EXCESS LIQUIDITY INCOME LEVELS DOMESTIC DEBT LOANS RESERVES PRIVATE CAPITAL DEBT SERVICE FINANCIAL SYSTEM RECURRENT EXPENDITURE MONETARY AUTHORITY LEGAL FRAMEWORK FINANCE BANK POLICY PUBLIC INVESTMENT TAXES FIXED EXCHANGE RATE EXPENDITURE TRANSACTIONS INFRASTRUCTURE INVESTMENT AUCTIONS EQUITY CREDIT EXPANSION MACROECONOMIC ENVIRONMENT MACROECONOMIC INSTABILITY HUMAN CAPITAL CAPITAL OUTLAYS GOOD GOVERNMENT BUDGET FINANCIAL CRISIS FUTURE CREDIT EXPANSIONS RETURNS CAPACITY CONSTRAINTS TREASURY BILLS GOVERNMENT EXPENDITURE INTEREST PAYMENT LOCAL BUSINESSES PRICE STABILITY REPAYMENT FINANCIAL PERFORMANCE GOVERNMENT REVENUE EXPENDITURES AMORTIZATION LIQUIDITY MANAGEMENT CURRENT ACCOUNT DEFICIT SHARES HUMAN CAPITAL DEVELOPMENT REAL EXCHANGE RATE MARKET FOREIGN EXCHANGE TRADE LIBERALIZATION INVESTMENT POLICY PUBLIC DEBT BALANCE OF PAYMENT TREASURY SOLVENCY CURRENCIES ECONOMIC DEVELOPMENT INVESTMENT RATES OPEN MARKET GOODS SECURITY INVESTMENT DEBT SERVICES SHARE POVERTY FINANCIAL RISKS CAPITAL REQUIREMENT DEBT SERVICE PAYMENTS FINANCIAL ASSETS BID CAPITAL INFLOWS REVENUE EXTERNAL DEBT PROFIT INVESTMENTS LENDING DEBT REPAYMENT CHECK TRUST FUND CREDIT GROWTH MACROECONOMIC POLICIES REPOS EXCHANGE RATE FISCAL DISCIPLINE GOVERNMENT INVESTMENT INSTRUMENT DEBT SERVICING PROFITS LIABILITIES COMMODITY PRICES SHORT-TERM LIQUIDITY LONG-TERM ASSETS DEVELOPMENT BANK HUMAN DEVELOPMENT INVESTING Bhutan and Botswana share a number of similarities. The two countries, land locked small states, have grown rapidly over the past few decades, boosted by sustained, large-scale inflows of foreign exchange. Botswana’s annual real growth rate averaged 9 percent over the past 40 years, driven by diamond exploration, whereas Bhutan has taken full advantage of generous foreign aid inflows to achieve an average growth rate of 8 percent per year for the past 30 years. However, after decades of rapid growth, the production base of both countries remains very narrow and the economy continues to directly or indirectly dependent on government demand. Job creation, particularly for the youths, is an important policy issue. Despite these similarities, Bhutan and Botswana exhibit an interesting contrast with regard to the management of volatile foreign exchange inflows, and its macroeconomic consequences. Notwithstanding the serious impact of the recent global crisis, today Botswana’s external position remains solid, guarded by sizable international reserves and low external debt. In contrast, Bhutan has accumulated large external debt and its international reserves are under significant pressure. This paper discusses Bhutan and Botswana’s experiences with managing volatile foreign exchange inflows. It assesses the nature and domestic economic consequences of volatile flows, and analyzes the policy measures that have been used to respond to revenue volatility. The structure of the paper is as follows. Section two analyzes Botswana’s experience of managing large, volatile diamond export earnings. Section three reviews more recent experience of Bhutan. Section four draws policy lessons from the experience of two countries. Finally section five concludes the paper. 2015-08-13T18:39:26Z 2015-08-13T18:39:26Z 2015-01 Working Paper http://documents.worldbank.org/curated/en/2015/07/24788392/small-countries-volatile-revenue-botswana-bhutan http://hdl.handle.net/10986/22394 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper Bhutan Botswana |