Resource information
This paper examines spending plans
suggested by the recent literature regarding Dutch disease
and examines their implications to Niger relative to its
expanding mineral sector. The key to the benefits of
significant mineral revenue lies with the productivity and
supply responses of spending. If significant output gain is
ensured, then there is little difference across the spending
plans in their effects on real consumption. The overshooting
of relative prices of the non-tradable sector or the
shrinking share of traded sectors in gross domestic product
is also ameliorated with greater supply flexibility. Growth
paths of alternative spending strategies differ markedly in
timing and pattern when spending does not raise
productivity. As a caution against expectations that
exaggerate the benefits of mineral revenue under all
circumstances, the more aggressive spending plan may result
in a boom-bust cycle if fiscal adjustments and debt
repayments are necessary for any significant borrowing
against future revenue and productivity gains are not
realized. Using extractive industries revenue for transfers
to households would have a greater effect on poverty
reduction in the short and medium term but the long-run
gains from investment in human and physical capital are
likely to offset the initial lack of pro-poor bias.
Different strategies differ significantly with regard to
risks and required technical implementation capacity and
political capacity to sustain a chosen course of action.
