Transforming the oil "curse" into a blessing

• Author: Menachem Katz/Ulrich Bartsch
• Position: IMF African Department
• Pages: 194-196

Page 194

For many oil-producing countries, favorable resource endowments have not led to rapid improvements in development indicators. Sub-Saharan African oilexporting countries, in particular, have remained behind non-oil exporters on the continent, whether in terms of per capita GDP, infant mortality, life expectancy, or literacy rates. How can these countries reap greater benefits from their resources? African officials and IMF and World Bank staff came together in late April in Douala, Cameroon, to discuss possible answers.

What looked at first to be a windfall-massive amounts of petro dollars that became available in the 1970s-soon turned into something else altogether. Oil-exporting countries in sub-Saharan Africa have tended to be plagued by macroeconomic volatility, and their non-oil sectors have been unable to provide employment to growing populations.What happened? Much of the blame for this disappointing performance lies with economic policies that have failed to make rational, effective use of oil revenues and with oil resource management that has lacked transparency.

At a workshop organized jointly by the IMF's African Department and the World Bank's Africa Region and its Oil and Gas Policy Unit in Douala, Cameroon, at the end of April, high-level government and central bank officials and general managers of national oil companies from nine sub-Saharan African oil-producing economies (Angola, Cameroon, Chad, the Democratic Republic of Congo, the Republic of Congo, Equatorial Guinea, Gabon, Nigeria, and São Tomé and Príncipe) exchanged views on the distinctive challenges that their economies faced. They also discussed policy options in various areas, including fiscal matters, foreign exchange reserves and foreign debt management, exchange rate regimes, and governance.

Opening the workshop,Michel Meva'a M'Eboutou (Minister of Finance of Cameroon) underlined the importance of oil revenue management. Abdoulaye Bio-Tchané (IMF) and Paul Collier (World Bank) pointed out that a stocktaking of country experiences and academic research, as well as the discussion of country-specific policy approaches, could provide renewed impetus for reform in oil-exporting countries.

Policy challenges and choices

Policy makers in oil-exporting countries face challenges arising from three characteristics of oil revenue, noted Menachem Katz (IMF): oil revenue is more volatile than...