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Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

Transparency and accountability in oil sector operations are necessary to improve governance in oil-producing countries. The same transparency and accountability guidelines that apply to non-oil revenue should apply to oil revenue. Oil revenue is part of government budgetary operations, and it is of overwhelming importance in the countries we are dealing with in this paper. The IMF’s Manual on Fiscal Transparency (IMF, 2001) states that comprehensive coverage of all fiscal activity undertaken by the central government is essential from a transparency standpoint. In some cases, the coverage should extend beyond the government itself: the public sector balance should be reported when nongovernmental public sector agencies undertake significant quasi-fiscal activities. The public should accordingly be provided with full information on the past, current, and projected fiscal activity of the government.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

The fact that oil-producing countries in Africa have not achieved better social indicators than other African countries gives rise to the question of whether this was despite or because of the inflow of billions of U.S. dollars in foreign investment in oil installations, and government oil revenue. The persistent underachievement of development goals has come to be seen as the “resource curse.” This paper has shown, however, that macroeconomic policies and governance can be designed in a way that turn oil revenue into a “blessing.”

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

In this chapter, we present the structure of institutions that oversee the oil sector. After reviewing the legal framework, we discuss the role of national oil companies.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

Oil-exporting countries have used a variety of exchange rate arrangements, as shown in Figure 9. At the end of 2001, about 18 of the 29 oil-producing IMF member countries (excluding the former Soviet bloc countries) used some form of fixed exchange rate regime, while 11 opted for either managed or independent floating. This suggests that, in practice, the choice of an exchange rate arrangement is not a straightforward exercise; instead, exchange rate policy has to be based on country-specific considerations, including the relative openness of the economy, in terms of both current and capital accounts, and the relative prevalence of real or nominal shocks. Exchange rate policy will also have to take into account the monetary policy and institutional framework in which it is set.18 This subsection describes first general considerations, then potential advantages of flexible exchange rates, and finally policies in support of fixed exchange rates.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

While it may not be possible to identify an “optimal” fiscal policy for oil countries in general, the discussions in the previous section provide important issues for consideration by policymakers. In this section, we present some operational issues to help in the design of schemes for the use of oil revenue. This subsection presents (1) the case for a rule-based fiscal policy and (2) possible fiscal rules, including two “extremes” to be used as guideposts for the possible range of expenditure profiles.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

How can a country turn oil revenues into a blessing rather than a curse? With growing international interest in new offshore oil deposits in sub-Saharan Africa, there is also greater scrutiny of the reasons why many oil-producing countries in the region have experienced disappointing economic performance over the past 20 to 30 years. This paper discusses the latest thinking on best-practice institutions and policies, compares this thinking with current practice in African oil-exporting countries, and presents a plan for the future, taking into account African policymakers’concerns.

Mr. John C. Odling-Smee

This article discusses the adjustment that takes place as economies recover from balance of payments difficulties. The experiences of seven countries that obtained financial assistance from the Fund illustrate various aspects of adjustment.

International Monetary Fund

This Selected Issues paper on the Central African Economic and Monetary Community (CEMAC) reviews the evolution of actual and equilibrium real effective exchange rates (REER). The current level of the CEMAC REER is broadly in line with its long-term equilibrium value. The estimation approach herein is subject to certain limitations, some of which are inherent to the literature that tries to estimate the equilibrium REERs. Absolute statements about magnitudes of any possible misalignments should be avoided given the degree of model uncertainty; error bands around estimated equilibrium exchange rates may, in some cases, yield inconclusive results.

Mrs. Harinder K Malothra, Mr. Milan M Cuc, Mr. Ulrich Bartsch, and Mr. Menachem Katz

Abstract

Over the last decade, the Atlantic Ocean off the coast of western and southern Africa has become one of the most promising oil-exploration areas in the world. Six countries in the area are by now well-established oil producers, and more are to join their ranks in the near future. Oil-producing countries are faced with some of the same challenges as other natural resource–based countries, but their difficulties seem to be accentuated by the peculiar nature of oil markets and oil production. The main challenges come from the high volatility of oil prices, the enclave nature of the oil sector, the exhaustibility of oil reserves, and the high concentration of revenue flows from the oil sector, which invites rent-seeking behavior and may lead to governance problems. In the past, many oil-producing countries have been disappointed in their expectations that favorable resource endowments would lead to rapid improvements in development indicators. This paper focuses on the policies that have been and should be implemented by the oil-producing countries. It summarizes proceedings of the Workshop on Macroeconomic Policies and Governance in Sub-Saharan African Oil-Exporting Countries, hosted jointly by the African Department of the International Monetary Fund and the Africa Region and the Oil and Gas Policy Unit of the World Bank. The workshop brought together high-level policymakers from African oil-producing countries during April 29–30, 2003, in Douala, Cameroon.