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February 2011

Fiscal adjustment, big time, in Madagascar

Jacques Morisset's picture

As OECD countries struggle to reduce their fiscal deficits, consider the case of Madagascar.  Half of its budget was financed by external assistance which, as a result of political turmoil in the country, has disappeared.

Millennium Villages Project continues to systematically overstate its effects

Gabriel Demombynes's picture

by Michael Clemens and Gabriel Demombynes

The Millennium Villages Project (MVP) is an experimental anti-poverty interventionin villages across Africa. In October, we released evidence that the Project’s official publications were overstating its real effects, and we offered suggestions on improving its impact evaluation. On Tuesday the MVP, whose leadership and staff are aware of our work, continued to greatly overstate its impact.

Commodity prices and African economies

Shanta's picture

Once again, commodity prices are on the rise. 

Unlike in 2008, when oil importers and exporters experienced symmetric shocks (one negative, the other positive), this time it appears as if both oil exporters and some oil importers in Africa are experiencing positive shocks. 

The reason is probably that, along with oil prices, other minerals such as gold and copper, cotton, and cocoa prices are also up—so even an oil importer may have on net a favorable terms of trade shock.  In addition, although some world food prices are rising, most food is domestically produced and not traded, so the negative effect of that may also be muted.  Of course, the situation may change if oil prices rise even further.

The following summary table, taken from the complete data set prepared by my colleague Cristina Savescu, gives the ten countries with the biggest positive and negative terms of trade shocks between December 2009 and December 2010, as a share of 2009 GDP.  

Terms of trade change December 2009-December 2010 as a percent of 2009 GDP:

Water, water everywhere…

Shanta's picture

 

 

 

 

 

 

 

 

 

 

 

 

 

On a panel at Water Week, I suggested that most of the problems with urban water come from the same source: mis-pricing of water. 

Water is a private good (if I drink a glass of water, you can’t drink it).  Private goods should be priced at their marginal cost.  Because poor people, like everybody else, need water for life, but they may not be able to afford it, governments typically subsidize water—i.e. price below marginal cost.  A subsidy means that somebody other than the consumer is paying the utility to deliver water.  In many countries, this somebody is a politician, who then uses the power associated with the subsidy for political patronage.   Water pipes go to neighborhoods of the politician’s choosing (which may not be where the poor live).   Meanwhile, poor people, because they need water, buy it from water vendors at 5-16 times the meter rate.