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How to manage revenues from extractives? There’s a book for that!

Rolando Ossowski's picture
 
Offshore oil and rig platform. Photo: © curraheeshutter / Shutterstock.


Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and how can you strengthen the fiscal management of your country’s oil and mineral revenues? Consider some of the issues that you would likely encounter:

For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.

How to manage the extractives sector? There’s a book for that!

Håvard Halland's picture
Photo Credit: Cor Laffra


Let’s assume you are a Finance Minister or ministry official of a country that has newly discovered oil or minerals.

What actions lay ahead? Or, if oil and mineral production is ongoing, how can you strengthen the public management of the extractive sector, which is a mainstay for national economies around the world?  
 
Planning for the development of an unfamiliar and complex sector can be daunting. How should sector policy objectives be determined?

Which economic, accounting and taxation principles should be considered? What kinds of laws and regulations would a government need to adopt? What roles do various ministries and government agencies play in administering these laws? How do technical, environmental and social considerations fit into the scheme of things? What about the investment of resource revenues, or the potential for new industry linkages?