20. Much of resource revenue management hinges on the relationships between the government, national resource companies (NRCs), and international companies. These relationships must be clearly defined for all stages of resource development. Extractive industries can affect the economy or environment at any stage from exploration through to abandonment. Exploration is usually the highest-risk element of any extractive industry project, though there is a difference in this respect between mining and petroleum,22 and substantial expenditure is generally required before a discovery is confirmed. Any government policies intended to encourage investment by international companies or using NRCs at various stages of development should be clear. In the petroleum industry, particular emphasis needs to be placed on clarifying the role of the national oil companies (NOCs). These still produce much of the world’s oil and often play a strong policy role relative to the rest of government. This chapter of the Guide examines the legal framework governing these relationships, the special nature of the fiscal regime for resource companies, the broad role of NRCs, including their noncommercial activities, and the clarity of revenue sharing arrangements with lower levels of government.
The Guide on Resource Revenue Transparency applies the principles of the revised IMF Code of Good Practices on Fiscal Transparency (‘the Code’) to the unique set of transparency problems faced by countries that derive a significant share of their revenues from natural resources and need to address complex and volatile transaction flows. The Guide identifies and explains generally recognized good or best practices for transparency of resource revenue management. It supplements the IMF Manual on Fiscal Transparency. The Guide has been revised to reflect the new Code and to provide more recent examples of good practice by individual countries. It is designed to give a framework for assessing resource-specific issues within broader fiscal transparency assessments (including so-called ‘fiscal ROSCs’). The Guide has been used by the governments and legislatures of resource-rich countries, civil societies, providers of technical support, and interested academics and observers.
120. The need for effective mechanisms to provide assurances of integrity is especially important in the case of resource revenue flows. The magnitude of these transactions and their technical complexity provide a high exposure to risks of malpractice. In developing countries, this situation is often combined with a lack of technical capacity and political failure to address risks adequately. The inherent risks107 associated with resource sectors require that governments place special emphasis on data quality, internal controls, and independent external audit. This chapter of the Guide examines some key requirements for establishing good practice in this area of the Code. The role of the EITI validation process is highlighted again in this context.
1.1 The government sector should be distinguished from the rest of the public sector and from the rest of the economy, and policy and management roles within the public sector should be clear and publicly disclosed.
72. Similar principles of transparency to those recommended for other parts of the government budget should apply to the processes for planning, allocating, spending, and reporting resource revenues. The special features of resource revenue, however, require that governments give particular emphasis to policy clarity with regard to explicit treatment of risks arising from the resource base, transparency of accounting, and control of receipts and spending. In particular, the government should clearly explain to the public its policies toward smoothing the impact of volatile revenue flows and ensuring long-term fiscal sustainability. If savings or stabilization funds have been established, they should be fully integrated into the overall fiscal policy framework. All resource-related asset holdings should be fully disclosed and asset management policies open. This section covers these and other good transparency practices that will lead toward an effective application of fiscal policy in resource-rich countries.
Mr. Amadou N Sy, Mr. Rabah Arezki, and Thorvaldur Gylfason
Countries with an abundance of natural resources, many of which are in sub-Saharan Africa, often show a record of relatively poor economic performance compared with non-resource-rich countries. The chapters in this volume explore the potential challenges to countries with abundant natural resources and ways to manage these challenges so as to reap the benefits of resource wealth while avoiding the pitfalls. The book is divided into five sections, which explore commodity markets and the macroeconomy, economic diversification and the role of finance, fiscal policy, exchange rates and financial stability, and governance. The ideas in this book were first presented at a seminar in November 2010 that was aimed primarily at policymakers in sub-Saharan Africa and brought together ministers, central bank governors, other senior policymakers, and well-known academics.
Botswana’s economy staged an impressive recovery during the past year. The strong economic recovery has helped stabilize financial market conditions. The overall external position has also strengthened. The overriding economic policy challenges are to reduce the size of government sustaining growth, diversify the economy, and improve its quality. The monetary and fiscal policy stance on the global food and fuel price shocks has been commended by Executive Directors. Sustaining growth, broadening its sources, and improving its quality are key policy priorities of the government.