Speech

Opening Remarks by Carla Grasso, IMF Deputy Managing Director at the Conference on Fiscal Management of Mining and Petroleum in West Africa

February 27, 2018

As prepared for delivery

Good morning! It is an immense pleasure for me to be here this morning to open the Conference on Fiscal Management of Mining and Petroleum in West Africa. The conference is jointly organized between the International Monetary Fund (IMF) and the Government of the Republic of Ghana.

I would like to start by expressing my gratitude to the Government, and in particular to the Vice President, Mr. Bawumia, for the warm hospitality and for agreeing to collaborate with us on this event.

The conference is financed by the IMF’s thematic fund on Managing Natural Resource Wealth. I would like to take this opportunity to express my appreciation to the partners—Australia, the European Union, the Netherlands, Norway, and Switzerland—who have come together on this initiative that supports countries in building capacity to mobilize and manage their natural resource wealth effectively and in a socially-responsible way. Without them, this event would not have been possible.

The focus of the conference is on how to strengthen the fiscal management of mining and petroleum resources. This topic is critically important for all the countries participating in the conference. It is also an issue that I am personally very interested in for two reasons.

First, because I oversee the IMF’s capacity development mandate, which is one of the core services we, with support from our partners, provide to our members. Strengthening the institutions responsible for the management of natural resources is a key part of those efforts. We firmly believe that with strong governments come effective policies, which can adapt to a changing global environment and help generate inclusive and sustainable development.

Second, I used to work previously in the mining industry and these issues are very close to my heart. Too often, it seems that having natural resources makes very little difference to countries in terms of achieving better developmental outcomes. In some particularly extreme cases, natural resources might even make the situation worse if, for example, these resources lead to violent conflicts or foster corruption.

We have also been reminded in recent years that commodity prices are highly cyclical and volatile. For countries in the region that are still dependent on revenue from the mining or petroleum sector, this has led to significant fiscal pressures.

There are no simple answers on how to escape the so-called Resource Curse. But countries that have derived sustained benefits from natural resources have one common factor, and that is sound fiscal management. And sound fiscal management is made possible only when there are strong economic institutions that can formulate effective policies.

There are four key pillars that help achieve this:

• The first pillar is having a tax system in place that ensures that the economic rent generated from mining and petroleum activities is fairly shared between investors and citizens. This requires governments doing their best to get early and dependable revenue and a higher share in more profitable projects.
• The second pillar is the capacity to effectively administer the tax system and ensure that mining and petroleum companies comply with the fiscal terms in the tax legislation or contracts.
• The third pillar is a macro-fiscal framework to manage well the revenue flows from mining and petroleum. This requires the right balance between saving some revenue for a rainy day or for future generations and scaling up budget spending on needed programs like infrastructure, health and education.
• The final pillar is fiscal transparency. It is said that sunlight is the best of disinfectants! This certainly applies to the extractives sector. Being transparent about mining and petroleum fiscal terms and contracts, revenue collections, and the ultimate use of revenues through the budget builds public trust. Internal transparency by sharing information between government agencies also is critical for effective fiscal management.

The program over the next few days focuses on these pillars for sound fiscal management. There will be strong emphasis on the interaction and dependency between the pillars. To give two examples: the best designed tax policy is not of much use without the capacity to administer it; and even if substantial revenue is collected, this will only improve the life of citizens in a sustained manner if the revenue is well managed through the budget.

Fiscal management requires effective collaboration and information sharing between different government institutions. No one institution can by itself achieve sound fiscal management of the mining and petroleum sectors. This requires the Ministry of Finance, the Revenue Authorities, Mining and Petroleum Ministries, and regulatory agencies to work together in terms of both policy design and implementation.

Recognizing this need for collaboration, I am pleased to see that country delegations for this conference have representatives from all these institutions. Just as there are gains from stronger collaboration between agencies, there are also ample opportunities for countries to learn from each other’s experiences both on successes and challenges encountered in managing natural resources.

Through the IMF’s capacity development mandate, governments around the world have worked with us—and with each other—to strengthen their economic policies and institutions. Our capacity development activities cover precisely the areas described in the four pillars: designing good tax policies, improving revenue administration, effectively managing public resources, and strengthening governance frameworks.

Our activities have been informed by the experiences gained across diverse countries at varying stages of development. We share this knowledge with our member countries through hands-on advice, on-the-ground training, and peer-to-peer events such as this one.

We have an excellent group of experts who will make presentations and guide the discussion during the conference.

But the success of this conference hinges on the participation of each of you. I encourage each of you to engage wholeheartedly in the discussions, share your experience and ask questions. I think you will find, as you share your experiences, that there are many common issues that you face where you can benefit by learning from your peers on how they dealt with them.

Together, we can work together in building the capacity to formulate and implement sound fiscal policies to foster a stable environment that supports sustainable economic growth and your development goals.

With these introductory remarks, I wish you a very successful and productive conference. It is now my great pleasure to hand over the podium to the Honorable Mahamudu Bawumia, Vice President of the Republic of Ghana.