Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana's Reliance on Diamond Revenue

15 Pages Posted: 2 Apr 2008

See all articles by Olivier Basdevant

Olivier Basdevant

International Monetary Fund (IMF) - IMF Institute; Government of New Zealand - Department of Economics

Date Written: March 2008

Abstract

This study assesses the sustainability of Botswana's diamond-related fiscal revenue. Diamond reserves are not adequate to generate enough permanent revenue to sustain a high level of expenditure. Under the current fiscal rule that no debt may be accumulated, Botswana will have to save more to avoid an abrupt adjustment in the medium term.

Keywords: Botswana, permanent income hypothesis, diamond-related fiscal revenue

JEL Classification: E62, O11, Q32

Suggested Citation

Basdevant, Olivier, Are Diamonds Forever? Using the Permanent Income Hypothesis to Analyze Botswana's Reliance on Diamond Revenue (March 2008). IMF Working Paper No. 08/80, Available at SSRN: https://ssrn.com/abstract=1115611

Olivier Basdevant (Contact Author)

International Monetary Fund (IMF) - IMF Institute ( email )

700 19 th Street NW
Washington, DC 20431
United States

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

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