wave of ‘unbundling’ the gas trading system in the US, Europe and elsewhere has increased competition, but a truly global gas market is yet to emerge, as the limited cross-border trade (at just 22 percent) is organized mostly on a regional basis, with very little interaction among the regional markets. The non-transparent nature of the gas contracting process, coupled with the presence of a significant element of rent in the price of gas for many exporters, has inadvertently led to a sub-optimal usage of the sector’s limited infrastructure. The pricecushion implied
This paper discusses the rising profile of natural gas in global energy, factors constraining its further development, the gas contracting process, and the absence of a global market, which is analyzed in the context of the economic rent in the gas price and the opaque nature of gas contracts. A proposal for rationalizing the trade to ease these constraints is offered. Gas pricing, and factors driving demand are also analyzed using evidence from the literature. FDI can help to monetize some of the 'stranded' gas reserves, but success would depend on an investor-friendly climate, including appropriate tariff regimes in the domestic markets.
of his governments’ action.
I. RECENT ECONOMIC DEVELOPMENTS
Real GDP grew by 4.2 percent in 2007 driven by domestic absorption and the recovery in diamond and timber exports. Reflecting the recovery of the agriculture sector and the sharp contraction in broad money due to a lower than expected aid transfers, inflation declined to 1 percent in 2007, a level significantly below the regional convergence criteria of 3 percent. Although the decline of the dollar and the domestic demand in response to high oil pricescushioned the deterioration of the external
International Monetary Fund. Asia and Pacific Dept
Malie Lototele, AsDB
20. Staff also encouraged the authorities to speed up the restructuring of the energy sector . Notwithstanding recent improvements and plans for further increasing the efficiency of the electricity and oil importer/distributor companies, the financial situation of the former remains a drain on public sector resources and also undermines the performance of the latter through payment arrears. Going forward, rationalizing the structure of both fuel and electricity prices (cushioning the impact of higher tariffs through targeted transfers for the
China—has also discouraged firms from passing on higher energy costs into output prices, cushioning the impact on CPI inflation (see Annex I ).
Emerging Asia: Consumer and Producer Prices
(12-month percent change)
Sources: CEIC Data Company Ltd; IMF, APDCORE database; and staff estimates.
(Year-on-year percent change, average)
International Monetary Fund. Asia and Pacific Dept
KEY ISSUES Context. Donor-financed large infrastructure projects, increased public spending, and a pick-up in credit to households have boosted real GDP growth to close to 4 percent in 2014 and to about 3 percent in 2015. Inflation remains low, underpinned by lower food and commodity prices. Steps are being taken to reduce the many hurdles to private growth that Kiribati faces, among which are high transportation and communication costs and an increasing impact of climate change. Fiscal policy. The fiscal outlook has improved, but further efforts are needed to ensure sustainability. The recurrent balance was in large surplus in 2014 and is expected to remain positive in 2015, reflecting high revenue from license fees, and notwithstanding a large increase in expenditures. But under the historic pace of spending the sovereign wealth fund (Revenue Equalization Reserve Fund—RERF) would be depleted in about 20 years. Ensuring sustainability requires containing nominal expenditure growth to around 1½ per annum over the next five years (after accommodating climate-change-related costs), with transparent and symmetric transfers and withdrawals from the RERF around this path. Structural reforms. There is a consensus among donors that significant progress has been achieved. The State-Owned Enterprise (SOE) Reform Act is being implemented in a satisfactory way, as illustrated by the recent successful privatization of the telecommunication company. Key outstanding issues include further reforming the energy and copra sectors and improving the investment climate.
Looking ahead, prospects are relatively bright. Regional growth is expected to amount to 6 percent both this year and next, propelled by vigorous exports and strong domestic demand in China and India. Meanwhile, headline inflation is expected to remain around 3—3½ percent, as lower food prices offset the impact of higher oil prices. At the same time, the region’s current account balance is forecast to remain around 3 percent of GDP, albeit with large changes in its distribution.
This paper reviews the Central African Republic’s three-year arrangement under the poverty reduction and growth facility. Concerns about the social impact of higher fuel prices have delayed implementation of an automatic pricing formula and caused serious fiscal losses. The new financing strategy is based on issuing debt instruments in the regional financial market to improve the domestic debt profile. IMF staff recommends completion of the second review, granting of waivers for nonobservance of performance criteria, and an augmentation of access.