Front Matter

Front Matter

International Monetary Fund
Published Date:
October 2007
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© 2007 International Monetary Fund

Production: IMF Multimedia Services Division

Typesetting: Alicia Etchebarne-Bourdin

Cataloging-in-Publication Data

Guide on resource revenue transparency/Fiscal Affairs Dept.,

International Monetary Fund—[Washington, D.C.]: International Monetary Fund, 2007.

p. cm.

Includes bibliographical references.

ISBN 978-1-58906-463-8

1. Revenue management—Government policy. 2. Transparency in government. 3. Disclosure of information. 4. Petroleum products—Economic aspects. 5. Gas industry—Economic aspects. 6. Mines and mineral resources—Economic aspects. I. International Monetary Fund. Fiscal Affairs Dept.

HD60.7.G853 2007

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Guide on

Resource Revenue Transparency

Fiscal Affairs Department


Abbreviations and Acronyms


Civil society organization


Domestic market obligation


Extractive Industries Transparency Initiative


Group of Eight


General Data Dissemination System


Gross domestic product


Gas-to-liquid (technology)


International Financial Reporting Standards


International Monetary Fund


International Public Sector Accounting Standard


Joint Oil Data Initiative


Liquefied natural gas


Medium-term fiscal framework


Norges Bank Investment Management


National development plan


National oil company


Norwegian Pension Fund-Global


National resource company


Organization for Economic Cooperation and Development


Organization of Petroleum Exporting Countries


Open Society Institute


Over-the-counter market


Production sharing contract


Quasi-fiscal activities


Report on the Observance of Standards and Codes


Special Data Dissemination Standard


Securities and Exchange Commission (United States)


United Nations Framework Classification


Value-added tax

The Code

Code of Good Practices on Fiscal Transparency

The Guide

Guide on Resource Revenue Transparency

The Manual

Manual on Fiscal Transparency


The Guide on Resource Revenue Transparency has become a major reference source since it was first published on the IMF website in 2005. I am delighted that this update is now being distributed in printed as well as electronic form. Its publication coincides with the distribution of the revised Code of Good Practices on Fiscal Transparency (2007) and Manual on Fiscal Transparency.

The Guide supplements the Code and Manual by applying the principles of the revised Code to the specific problems faced by countries rich in natural resources. It provides additional, detailed transparency guidelines, accompanied by explanatory text and examples of good practice in producing countries. A principle objective of the Guide is to help steer resource rich countries through the special issues arising from the technical complexity and volatility of resource revenue flows and from the sheer magnitude of such transactions. It also provides a framework for assessing resource-specific issues within Reports on the Observance of Standards and Codes (ROSC) fiscal transparency modules.

More generally, the Guide makes available to providers of technical support and civil society a set of authoritative references of good and best practices of resource revenue transparency. For example, the Guide has already been used extensively by the multiple stakeholders of the Extractive Industries Transparency Initiative (EITI). But it also goes beyond the EITI in recommending good practices in the use of resource revenues.

The publication of the Guide underscores the Fund’s conviction that transparency is fundamental in establishing and maintaining credibility in the management of resource revenues. The revised Guide contains numerous cross references to the revised Manual and has been enhanced by the addition of further examples of good practice and references to recent developments.

I would like to acknowledge past and current staff of the Fiscal Affairs Department responsible both for the initial production and current revision of the Guide, including William Allan, Günther Taube, Charles McPherson, Philip Daniel, Jon Shields, Taryn Parry, Dawn Rehm, Lynn MacFarlane, Ezequiel Cabazon, and Nadia Malikyar. I would also like to thank the many other IMF colleagues who have contributed to the Guide. Martha Bonilla in the External Relations Department edited and coordinated this publication.

Teresa Ter-Minassian


Fiscal Affairs Department



1. This Guide on Resource Revenue Transparency (hereafter, the Guide)1 applies the principles of the Code of Good Practices on Fiscal Transparency (hereafter, the Code) to the unique set of transparency problems faced by countries that derive a significant share of revenues from natural resources.2 It is intended to supplement the Manual on Fiscal Transparency (hereafter, the Manual) by providing a more detailed set of guidelines to address the issues arising from the sheer size of such resources for many countries, combined with the technical complexity and volatility of the transaction flows. The Guide is designed to give a framework for assessing resource-specific issues that may be considered in the fiscal transparency assessments called fiscal transparency modules of Reports on the Observance of Standards and Codes (hereafter, fiscal ROSCs).3 But, equally important, the Guide provides a summary overview of generally recognized good or best practices for transparency of resource revenue management that can be used by resource-rich countries or by IMF staff, the World Bank, and other providers of technical support and civil societies.

2. Some have argued that there is an association between resource riches and poor economic performance (the “paradox of plenty” or “resource curse”), and a significant body of literature has sought to explain the relationships between resource abundance and economic performance.4 But the resource curse is not inevitable: a range of countries with prudent and transparent management practices (including Botswana, Canada, Chile, and Norway) has benefited from resource wealth.5 The key question for a large number of countries is how they can ensure that their abundance in resources remains a blessing. In addition to the possible adverse impact on growth, resource riches have been seen as a major contributor to corruption and social unrest. In a number of countries, oil, diamonds, and other minerals (and timber) have been associated with causing and financing civil war, with its attendant social and economic costs.6 Developing countries with limited capacity also face major challenges in dealing with the high risks and complexity of resource sector transactions.7 The tables in Appendix I list more than 50 countries designated as rich in hydrocarbon and mineral resources.8 Many of these are low- and middle-income countries in which resource revenue (principally in petroleum-rich countries) accounts for over 50 percent of government revenue or export proceeds.

3. One explanation for the relatively poor performance of nonresource sectors in some resource-rich economies is that activity is drawn away from the nonresource sector by the impact of a rising value of resource exports on the exchange rate and competitiveness (sometimes known as “Dutch disease”). Careful macroeconomic management and prudent fiscal policy can mitigate the impact of this phenomenon, and a transparent approach to fiscal policy will provide a sound basis for securing public support for the difficult policy and spending choices that are sometimes required over the longer term. More fundamentally, however, many analysts have emphasized the essential role played by fiscal transparency in improving resource revenue management, which will foster the efficient use of public funds, reduce the risk of unstable macroeconomic policies, and improve confidence in the budget process.9

4. Given the potentially substantial costs of nontransparent practices, institutional strengthening to improve transparency in vulnerable resource-rich countries should provide an ample pay off for a relatively modest investment. In particular, transparency can help establish and maintain credibility in regard to the collection and distribution of resource revenue. This was one of the motivations behind the creation in 2002 of the Extractive Industries Transparency Initiative (EITI).10 In the past several years, moreover, considerable agreement has been reached on a wide variety of good resource revenue management practices (particularly oil and gas).11 This Guide draws heavily upon this body of work in seeking to integrate transparency-related recommendations within the framework of the Code.

5. The Guide focuses on actual and potential revenues from nonrenewable resources, and especially on oil and gas. Oil production provides the most dramatic illustration of the problems posed by resource riches for developing countries: very large, quickly growing, but time-limited production and revenue flows, combined with a high degree of volatility because of fluctuating world prices. When administration is weak, ownership of such wealth provides ample scope for inefficient policies, discretionary behavior, and outright corruption, all of which could contribute to poor growth performance and eventual dissipation of national oil wealth.12

6. Similar concerns, albeit usually on a lesser scale, can arise in managing other nonrenewable resources (e.g., copper, diamonds, and gold). Most of the practices suggested in the Guide therefore apply with similar force to other extractive industries. Specific problems differ for each type of industry, and even within the hydrocarbon sector, issues faced in natural gas development differ significantly from those of the oil industry. Various mining industry sectors also face some unique problems. The Guide focuses on the common need among these sectors to manage resource asset wealth and revenues in a transparent way, but it also notes some of the distinctive industry-specific concerns across the variety of extractive industries.

7. Some of the practices suggested in this Guide for the petroleum and mining industries are applicable at a very general level to renewable resource assets, such as forestry and fisheries, particularly with regard to openness of the legal framework and fiscal regime, clear documentation of resource revenues, and effective accounting and audit of revenue flows. However, with one or two important exceptions, the magnitude of resource revenue flows to governments in these industries generally does not pose the level of potential problem posed by large hydrocarbon resources. The primary concerns for these industries are managing a common pool resource, taking effective account of the environmental impact, and establishing prudential rules. Industry-specific transparency concerns of forestry and fisheries are beyond the scope of this Guide.

Revisions to the Code, Manual, and Guide

8. This Guide has been updated from the first edition (2005), mainly to align it with the revisions made to the Code and Manual in May 2007. These revisions include a change in the ordering of the four pillars of fiscal transparency (and hence in the ordering of the chapters in the Manual and Guide) and changes to some of the good practices on fiscal transparency. (The revised Code is shown in Appendix II.) Revisions to the Code of particular relevance to resource revenue transparency include the addition of the following good practices:

  • Contractual arrangements between government and public or private entities, including resource companies and concession operators, should be clear and publicly accessible. (1.2.4)
  • Government liability and asset management, including the granting of rights to use or exploit public assets, should have an explicit legal basis. (1.2.5)
  • Receipts from all major revenue sources, including resource-related activities and foreign assistance, should be separately identified in the annual budget presentation. (3.1.4)
  • The government should publish a periodic report on long-term public finances. (3.1.7)
  • Purchases and sale of public assets should be undertaken in an open manner, and major transactions should be separately identified. (4.2.4)

9. Other revisions to the Code include the broadening of some practices to make more explicit requirements, such as the specification of a medium-term fiscal policy framework and an audit of the final accounts. The updated Manual also deals more deeply with some matters relevant for resource revenue transparency, including public-private partnerships, concessions, and guarantees.

10. In addition to its alignment with the strengthened practices in the Code, the Guide has been enhanced in a few areas, including the discussions on medium-term frameworks, long-term reports, resource-related funds, and internal oversight of revenue flows. It has also been updated in line with some recent developments, including the new governance structure for the EITI, and has been reinforced by the addition of further country examples.

Recent Work by the IMF, the World Bank, and Other Agencies

11. One of the main priorities for the fiscal ROSC program is to ensure effective coverage of resource-rich countries. These ROSCs are increasingly being informed by material in the Guide.13 Additionally, in other core activities, the IMF has intensified its interaction with resource-rich countries through policy advice, surveillance, workshops, and technical assistance. The IMF has assisted in particular with volatility in commodity prices and the associated macroeconomic and fiscal policy challenges. Studies by IMF staff have highlighted critical aspects of fiscal regimes for ensuring transparency of resource revenues. The IMF also encourages countries to participate in its Special Data Dissemination Standard or General Data Dissemination System (SDDS and GDDS), which call for, for example, the public dissemination of monthly or quarterly oil production data.14

12. In its mining and petroleum sector and country work, the World Bank is actively promoting more effective resource management practices by both national companies and governments. Following a review of its lending and support activities in oil, gas, and mining production, the Bank has placed considerable emphasis on revenue transparency as a basis for its continuing involvement in such projects.15 IMF and World Bank teams have worked very closely together on a number of projects in resource-rich countries, such as Azerbaijan and Nigeria.

13. Following its conference in Oslo in 2006, the EITI, which focuses on the transparency of revenue payments and receipts in resource-rich economies, acquired the status of an international organization. A multi-stakeholder board was established, with 19 members representing five constituencies: implementing countries, supporting countries, civil society organizations, company or company associations, and institutional investors.16 The chair of the board is independent. A small secretariat is being constituted in Oslo in 2007. The IMF and World Bank attend board meetings as observers and provide technical advice and support to the EITI.17 Together with other broader transparency and anti-corruption initiatives, both fiscal ROSCs and the EITI process have been strongly supported by the Group of Eight (G-8) countries at successive G-8 summits.18

14. Improvements in the quality and dissemination of oil market data have been fostered at a global level by the Joint Oil Data Initiative (JODI).19

Approach and Structure of the Guide

15. The structure of the Guide follows that of the Manual. It contains four chapters, each corresponding to one of the four pillars of fiscal transparency: (1) clarity of roles and responsibilities, (2) open budget processes, (3) public availability of information, and (4) assurances of integrity. Within each chapter, the Guide lists a series of resource-specific good practices of fiscal transparency and cross-references these to specific good practices in the Code (identified by three-digit references). As in the Manual, a few practices draw on standards that are complementary to the Code (e.g., international accounting and auditing standards).20 The Guide also gives illustrations of practices in specific countries and addresses issues that have arisen in their implementation, drawn from recent literature on these topics or directly from country experience. (In many cases, the text includes website references to provide direct access to more detailed information.)

16. The Guide is designed to be used in a similar way to the Manual by providing supplementary material on resource-related practices. Implementation of the good practices discussed in the Guide is voluntary. For resource-rich countries, as for others, participation in a fiscal ROSC is an important step in identifying areas of transparency weakness and strength, as well as signaling a commitment to reform. While serving as a reference source on good practices for country authorities, the Guide provides a basis for discussions with IMF staff and other external agencies, which might include the potential provision of technical assistance or other activities designed to improve resource revenue transparency and management.

17. In promoting resource revenue transparency, it is particularly important to recognize the diversity of country backgrounds. The pace of reform must suit individual country circumstances. The Guide recommends practices drawn from the experience of advanced economies, as well as some emerging market and developing countries that are improving their transparency standards. These provide appropriate points of reference. However, many developing countries have to overcome underlying capacity constraints before they can fully align themselves with these practices. The Guide, therefore, seeks to avoid setting the bar too high; it allows countries to assess where they stand relative to recognized good practice. Addressing weaknesses will require time, sustained commitment, and close linkages among fiscal transparency assessments, country administrative reform, and carefully designed technical support from international and bilateral agencies.

18. Countries will need to establish priorities among the suggested practices both over time and according to their specific circumstances. A high immediate priority should be given to improving the quality and public disclosure of data on resource revenue transactions, using either mechanisms required under the EITI or alternative formats that provide adequate assurance of data quality. Transparency of current revenue transactions is an area in which many low- and middle-income countries can make immediate measurable progress, with technical support if necessary. Equally high priority should be given to establishing clear policies regarding the pace of extraction and the use of resource revenues. The need to preserve the value of the finite resource assets, and the wise use of proceeds from selling these assets, should be clearly recognized in fiscal policy frameworks. Other issues present more difficulties, and progress will necessarily be slower. For instance, there are high degrees of uncertainty over the value of resource assets owned by governments, and methodological and measurement problems complicate the estimation of resource asset worth. Progress in implementing the recommended transparency practices on resource asset estimates and their integration into government balance sheets and net worth calculations will thus be limited over the short term, especially in low- and middle-income countries.

19. The remainder of the Guide is organized as follows. First, a summary is provided of good fiscal transparency practices for resource revenue management. The following four chapters then discuss these practices and related issues in more detail. Chapter I deals with applying the Code precept of clarity of government roles and responsibilities to resource revenues. Chapter II discusses issues related to open budget processes, with an emphasis on the need to link resource revenues clearly to overall goals of fiscal stabilization and long-term sustainability. Chapter III focuses on public availability of information, including the application of EITI guidelines. Chapter IV focuses on the issues of establishing overall assurances of integrity in resource revenue management. Appendix I lists countries that are defined as resource rich in either (or both) hydrocarbons or minerals. Appendix II contains the revised Code.

Summary of Good Fiscal Transparency Practices for Resource Revenue Management

An overview of the good practices of resource revenue transparency suggested in the Guide as the basis for voluntary compliance is presented below. The practices are listed using the same broad structure as the Code, which groups fiscal transparency good practices according to four pillars.21The three-digit references alongside each resource-specific good practice identify the related good practices in the revised Code (2007).

I. Clarity of Roles and Responsibilities

A. Legal Framework for Resource Revenues 1.2.4/1.2.5

The government’s ownership of resources in the ground should be clearly established in law, and the power to grant rights to explore, produce, and sell these resources should be well established in laws, regulations, and procedures that cover all stages of resource development.

B. Fiscal Regime 1.2.2/1.2.4

The government’s policy framework and legal basis for taxation or production-sharing agreements with resource companies should be presented to the public clearly and comprehensively.

C. Authority over Revenue Flows and Borrowing 1.2.2

Fiscal authority over resource-related revenue and borrowing is clearly specified in the law. Legislation should require full disclosure of all resource-related revenue, loan receipts and liabilities, and asset holdings.

D. Equity Participation 1.1.5/1.2.4

Government involvement in the resource sector through equity participation should be fully disclosed and the implications explained to the public.

E. National Resource Companies 1.1.4/1.1.5

Ownership structures of national resource companies and their fiscal role vis-à-vis the resource sector ministry and the finance ministry should be clearly defined.

Commercial responsibilities should be clearly distinguished from policy, regulatory, and social obligations.

F. Quasi-Fiscal Activities of Resource Companies 1.1.4/1.1.5

Arrangements whereby international or national resource companies undertake social or environmental expenditure or provide subsidies to producers or consumers without explicit budget support should be clearly defined and described in the budget documentation.

G. Subnational Government and Resource Revenues 1.1.3

Arrangements to assign or share resource revenues between central and subnational levels of government should be well defined and explicitly reflect national fiscal policy and macroeconomic objectives.

II. Open Budget Processes

A. Fiscal Policy and Resource Revenues 2.1.2/2.1.4

The budget framework should incorporate a clear policy statement on the rate of exploitation of natural resources and the management of resource revenues, referring to the government’s overall fiscal and economic objectives, including long-term fiscal sustainability.

B. Fiscal Policy, Resource-Related Funds, and the Budget 2.1.5

Mechanisms for coordinating the operations of any funds established for resource revenue management with other fiscal activities should be clearly specified.

C. Operations of Resource-Related Funds 2.1.2

Operational rules applied to resource-related funds should be clearly stated as part of an overall fiscal policy framework.

D. Fiscal Policy and Asset Management 2.1.2/1.2.5

The investment policies for assets accumulated through resource revenue savings should be clearly stated, including through a statement in the annual budget documents.

E. Accounting for Resource Revenues 2.2.1

The government accounting system or special fund arrangements should clearly identify all government resource revenue receipts and enable issuance of timely, comprehensive, and regular reports to the public, ideally as part of a comprehensive budget execution report. The reports should be based on a clear statement of the accounting basis (cash or accrual) and policies.

III. Public Availability of Information

A. Budget Documentation of Resource Revenues and Spending 3.1.1/3.1.4

All resource revenue-related transactions, including through resource funds, should be clearly identified, described, and reported in the budget process and final accounts documents.

B. Reporting on Company Resource Revenue Payments 3.1.4

Reports on government receipts of company resource revenue payments should be made publicly available as part of the government budget and accounting process.

C. Fiscal Balance 3.2.3

The (primary) nonresource fiscal balance should be presented in budget documents as an indicator of the macroeconomic impact and sustainability of fiscal policy, in addition to the overall balance and other relevant fiscal indicators.

D. Reporting on Resource-Related Debt 3.1.5

The government’s published debt reports should identify any direct or indirect collateralization of future resource production, for instance through precommitment of production to lenders. All government contractual risks and obligations arising from such debt should be disclosed.

E. Reporting on Assets 3.1.5

All financial assets held by government domestically or abroad, including those arising from resource-related activities, should be fully disclosed in government financial statements.

F. Estimating Resource Asset Worth 3.1.5

Estimates of resource asset worth based on probable production streams and assumptions should be disclosed.

G. Reporting Contingent Liabilities and Quasi-Fiscal Activities 3.1.3

Government contingent liabilities and the cost of resource company quasi-fiscal activities arising from resource-related contracts should be reported in budget accounts or other relevant documents in a format that helps assess fiscal risks and the full extent of fiscal activity.

H. Fiscal Risks 3.1.3

Risks associated with resource revenue, particularly price risks and contingent liabilities, should be explicitly considered in annual budget documents, and measures taken to address them should be explained and their performance monitored.

IV. Assurances of Integrity

A. Internal Control and Audit of Resource Revenues 4.2.5

Internal control and audit procedures for handling resource revenue receipts through government accounts or special fund arrangements, and any spending of such receipts through special funds, should be clearly described and disclosed to the public.

B. Tax Administration Openness 4.2.6/1.2.1

Tax administration should be conducted to ensure that resource companies understand their obligations, entitlements, and rights. The scope for discretionary action by tax officials should be clearly defined in laws and regulations, and the adequacy of sector skills and standard or sector-specific procedures should be open to review.

C. Oversight of Companies 4.3.1/1.1.5

International and national resource companies should comply fully with internationally accepted standards for accounting, auditing, and publication of accounts.

D. Oversight of Company/Government Revenue Flows 4.3.1

A national audit office or other independent organization should report regularly to the legislature on the revenue flows between international and national companies and the government and on any discrepancies between different sets of data on these flows.

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