Thus, let’s say oil and gas revenues decline by one-half, in the absence of a stabilization fund, expenditures would need to be reduced by 21 per cent. Sudden sharp reductions in government expenditures (of this magnitude) could have serious adverse effects on government programmes. (Particularly, in view of the lumpiness of government investment projects).
This is what happened in the 1980s when oil prices declined from $ to $ per barrel, forcing government expenditures to be cut by 40 per cent, even after the Government had recourse to foreign borrowing of about $ billion.