Luiz Edgard Oliveira

Associate Economist

Macroeconomic forecasting, Regional analysis

Luiz.Oliveira(at)sf.frb.org

Working Papers
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Addressing Debt Vulnerabilities in Small States: The Potential Role of New Financing Instruments

World Bank Group, Macroeconomics and Fiscal Management Discussion Paper, No. 10 | With Haque, Partow, and Varma | March 2016

abstract (+)
This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. These proposed financing mechanisms would allow bilateral development partners to utilize committed but undisbursed climate adaptation funds in ways that help small states reduce or manage debt servicing obligations while also supporting continued investment in climate adaptation to reduce climate vulnerabilities. Debt-for-climate adaptation swaps would see bilateral creditors pay down debt owed to multilateral creditors by small states, with small states then reallocating avoided debt repayments to climate adaptation projects and programs. Climate adaptation development policy financing would involve the provision of sector or general budget support to small states by multilateral or bilateral creditors (potentially tied to debt service or early debt repayments), conditional on implementation of policy measures to address climate vulnerability risks. In this paper we provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. We find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. We demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. We conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve (or are accompanied by) macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation.
Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants

IMF 2012-12 | With Drummond, Daal, and Srivastava | May 2012

abstract (+)
Mobilizing more revenue is a priority for sub-Saharan African (SSA) countries. Countries have to finance their development agendas, and weak revenue mobilization is the root cause of fiscal imbalances in several countries. This paper reviews the experience of low-income SSA countries in mobilizing revenue in recent decades, with two broad aims: identify empirical norms of how much and how fast countries have been able to mobilize more revenue and empirical determinants (panel estimates) of revenue mobilization. The paper finds that (i) the frequency distribution of changes in revenue ratios for SSA low-income countries (LICs) peaks at a pace of about ½-2 percentage points of GDP in the short-to-medium term and at a pace of about 2-3½ percentage points of GDP over the longer term, and that (ii) almost all SSA-LICs managed to increase revenue ratios by more than 2 percentage points of GDP in the short-to-medium term, at least once in the last two decades. The sustainability of large increases in revenue ratios can be an issue, in particular for fragile countries. The panel estimates suggest that structural factors, such as per capita GDP, share of agriculture in GDP, inflation, degree of openness, and rents received from natural resources, are important determinants of tax revenue.
Other Works
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Fiscal Policies for Development and Climate Action

World Bank Group Macroeconomics, Trade & Investment, September 2018, 1-8 | With Pigato, Schuler, and Mele

Building a Better Future Together

Dominican Republic Policy Notes, October 2016, 1-112 | With et al.

Jamaica: Laying the Foundations for Growth and Debt Sustainability

Jamaica: Economic Update 2, Fall 2015, 1-24 | With Varma, Antonio, and Beckerman

abstract (+)
An extended drought in 2014 and 2015 slowed Jamaica’s economic growth and diminished its prospects for poverty reduction. The government continues to make impressive progress in macroeconomic stabilization and fiscal consolidation. The gross domestic product (GDP) growth rate is expected to recover to 1.5 percent in FY2015-16, while progress continues towards achieving debt sustainability. A number of investment projects are currently being prepared, including some designed to support the government’s logistics hub initiative, and capital spending is expected to rise. While the recent PetroCaribe debt buyback has reduced the debt overhang, Jamaica’s progress on debt sustainability and its ability to address solvency issues will hinge on resurgence in growth. Jamaica still faces large debt repayments over the medium term and will need to maintain access to commercial markets in order to finance them. A United States (U.S.) 2 billion dollars bond issue in July in support of the PetroCaribe buyback will also help pre-finance a large domestic debt repayment scheduled for February 2016, the first significant domestic debt amortization since the national debt exchange of 2013. A modest recovery in per capita GDP growth is expected to slightly reduce the poverty rate from 19.9 percent in 2012 to 18.7 percent in 2016.
Regional Economic Outlook: Sub-Saharan Africa, Sustaining Growth amid Global Uncertainty

World Economic and Financial Surveys, April 2012, 1-137 | With IMF staff

abstract (+)
Sub-Saharan Africa continues to record strong economic growth, despite the weaker global economic environment. Regional output rose by 5 percent in 2011, with growth set to increase slightly in 2012, helped by still-strong commodity prices, new resource exploitation, and the improved domestic conditions that have underpinned several years of solid trend growth in the region’s low-income countries. But there is variation in performance across the region, with output in middle-income countries tracking more closely the global slowdown and with some sub-regions adversely affected, at least temporarily, by drought. Threats to the outlook include the risk of intensified financial stresses in the euro area spilling over into a further slowing of the global economy and the possibility of an oil price surge triggered by rising geopolitical tensions.