Fiscal Vulnerability and Sustainability in Oil-Producing Sub-Saharan African Countries

IMF Working Papers, August 1, 2009

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Over many years rises and fall of world oil prices have been repeatedly reflected in the boom-bust cycles in oil-exporting countries the world over.
The recent spectacular rise and equally spectacular fall in prices provides an opportunity to inquire whether anything is different this time.
The paper limits the analysis to the experience, outlook, and long-term fiscal policy considerations for eight of the world's oil-producing countries in sub-Saharan Africa.
To gauge fiscal vulnerability and sustainability from the angle of managing exhaustible oil wealth, the analysis focuses on the non-oil primary balance as the relevant indicator of how initial conditions and resource endowments can influence long-term considerations in several different models of fiscal rules.

Primary analytical indicator: non-oil primary balance.
Scope: eight oil-producing countries in sub-Saharan Africa (countries not enumerated on this page).
Emphasis on linkage between world oil price volatility (boom-bust cycles) and fiscal outcomes in oil-exporting economies.
Examination of how initial conditions and resource endowments interact with different fiscal-rule models to affect long-term fiscal vulnerability and sustainability.

Long-term fiscal policy must account for exhaustibility of oil wealth.
Fiscal rules and the non-oil primary balance are central to assessing sustainability and vulnerability in oil-dependent economies.
Management of oil revenue volatility is essential to mitigate boom-bust fiscal cycles.