Countries deriving a significant share of revenues from natural resources face a unique set of problems. The IMF’s Guide to Resource Revenue Transparency applies the principles of the Code of Good Practices on Fiscal Transparency (the code), with a greater level of relevant detail than that provided by the Manual on Fiscal Transparency (the manual). The guide gives a framework covering the resource-specific issues to be considered in a fiscal transparency assessment, and a summary overview of good or best practices for transparency in resource-revenue management.
There are significant difficulties faced by countries rich in natural resources, often low or middle-income, where resource revenue accounts for over half of government revenue or export proceeds. Oil production, for example, is a large business that grows quickly, but experiences a high degree of volatility as a result of fluctuating world prices. Combined with weak administration, there is ample scope for inefficiency, corruption, and therefore poor growth performance. Resource riches are also identified as an important factor contributing to corruption, social unrest and civil war, and their resultant economic and social costs.
However, the ‘resource curse’ of poor economic performance can be avoided. Many analysts have emphasised the essential role played by fiscal transparency in improving resource revenue management, and there is considerable agreement on a wide range of management practices.
Given the potentially substantial costs of non-transparent practices, institutional strengthening to improve transparency should provide an ample pay-off for a relatively modest investment. Recent work to this end includes:
- Since the late 1990s the IMF has promoted fiscal transparency in member countries through fiscal Reports on Observance of Standards and Codes (ROSCs).
- The IMF has intensified its operational involvement in resource-rich countries through policy advice, surveillance and technical assistance.
- The IMF encourages countries to participate in its General and Special Data Standards, disseminating data on periodic resource production.
- The World Bank is actively promoting more effective resource management practices in national companies and governments within the mining sector. Following a review of lending in oil, gas and mining production, the Bank will place considerable emphasis on revenue transparency as a basis for its continuing involvement.
- In 2002 the Department for International Development (DFID) launched the Extractive Industries Transparency Initiative (EITI), now supported by a range of governments, civil society groups and industry. The G8 has started a broader transparency and anti-corruption initiative, and globally, the Joint Oil Data Initiative (JODI) aims at improving the quality of oil market data.
The guide follows the code’s structure, and under its broad principles of transparency, applies those parts most relevant to resource issues, using country illustrations.
- Implementation is voluntary: the IMF, World Bank and others will discuss practices with countries, and encourage them to implement these.
- The guide will supplement the manual when conducting fiscal ROSCs in resource-rich countries. Although the guide identifies good and best practices for consideration, fiscal transparency will be assessed against the model defined in the code only.
- The pace of reform must be according to individual country circumstances – the guide provides some recommended practices, but for many developing countries such standards may not yet be attained.
- Priorities must be established appropriate to country-specific circumstances. High priority must be given to improving the quality and public disclosure of data on resource revenue transactions, and establishing clear policies for the use of resource revenues.
- As well as a focus on transparency in general government, the guide seeks to foster voluntary agreement regarding transparency among stakeholders (international companies, lenders and others).
