Budget, Debt, and Deficits

A U.S. default would send a shock through the global economy and risk the credibility of the U.S. dollar.  It would also alarm U.S. allies while presenting a gift to its adversaries.

The costs of hosting the Olympics have skyrocketed, while the economic benefits are far from clear. This has led to fewer states interested in playing host and a search for options to lighten the burdens of staging the big event.

U.S. lawmakers are at loggerheads over raising the limit on government borrowing. Here’s what to know about the debate.

In addition to undermining European unity, BRI may also work to cleave the transatlantic alliance. To head off these dilemmas, Europe will need to provide clear alternatives to Chinese infrastructure spending.

The economic impact of COVID-19 has exposed the underlying fragility of China’s Belt and Road Initiative (BRI) in Kenya, already the subject of scrutiny over corruption, pollution, and debt concerns. BRI fueled an ambitious infrastructure push in Kenya.

Nigerian lawmakers are seeking passage of a Petroleum Industry Bill (PIB) that would reorganize the oil industry. Since the establishment of civilian government in 1999 after a generation of military rule, repeated attempts at passing a PIB have been made. But the government, the political class, and the industry's leaders (foreign and domestic) have never reached a consensus that would make the reordering possible of such a crucial industry. The technical issues are exceedingly complex. Uncertainty around the bill has contributed to low levels of new investment in the industry.  However, against the backdrop of low international oil prices, the worldwide move away from fossil fuels, and pervasive security and other crises in the country, the Buhari administration appears to believe that passage now has a good chance. More generally, anecdotal evidence suggests that the political class has recognized that oil is likely to be less important in the future than it has been in the past. Oil and natural gas are the property of the state. They are exploited in partnerships and joint agreements between the government-owned Nigerian National Petroleum Corporation (NNPC) and privately owned oil companies, both international (such as Agip, Total, Shell, ExxonMobil, and Chevron) and now numerous small Nigerian firms. In part because of security issues in the oil patch—including attacks on oil facilities reflecting an alienated population—about half of all oil production is offshore. Oil and gas are a relatively small percentage of Nigeria's economy and employ few but are nonetheless central to government revenue. Revenue from oil provides about 65 percent of government revenue (as of 2018), and securing and maintaining access to it is an essential driver of political-class behavior. Further, successive Nigerian governments made use of below-market-price oil to expand the country’s political influence, especially with member states of the Economic Community of West African States (ECOWAS). Hence the PIB is a profoundly political document, with winner and losers.  Earlier in this century, oil was at the center of the Washington-Abuja bilateral partnership. The United States typically purchased about half of Nigeria's two million-barrels-per-day production. Further, successive military and civilian governments assured Washington that in the event of a cut in Middle Eastern oil because of a political crisis, Nigeria would do what it could to increase its own production. (Nigeria's capacity to increase production was limited, but the commitment to do so was important politically.) Hence, in those days, a PIB was closely watched in Washington and in American board rooms. Now, however, the United States imports almost no oil from Nigeria, the result of domestic fracking and the expansion of oil production in the Western hemisphere. That reality reduces the political significance for Washington of a PIB—though not for the big American oil companies active in Nigeria. Nigeria now sells oil that once was bound to the United States to India, Indonesia, China, and elsewhere in Asia.  Will the Buhari administration succeed in passing a PIB? The chances would appear to be good for the passage of some sort of legislation. But what the new bill will actually mean will depend on the details—and also on the institutions and schedules required for its implementation. Hence a passed PIB is not over "until the fat lady sings."

The coronavirus pandemic is placing enormous budget pressure on state and local governments, threatening deep and potentially lasting cuts to education, infrastructure, and other important investments.  

The coronavirus pandemic has forced countries around the world to take steps to weather the economic shock, often including borrowing. Multilateral institutions, the United States, and China all should do more to help low-income countries manage the debt burden.