Designing Oil Revenue Management Mechanisms: An Application to Chad

Benoît Campagne (), Markus Kitzmuller and Silvana Tordo

No 9402, Policy Research Working Paper Series from The World Bank

Abstract: Oil resources usually play a significant role in oil-rich countries, in gross domesticproduct and government revenues. High dependence of government revenues on oil can contribute to severerecession following an adverse commodity price shock, such as in 2014. This paper examines the extent to which a fiscalrule or stabilization fund could translate into a less pro-cyclical fiscal policy, with the government saving partof its oil revenues during periods of high prices and drawing down on the savings during difficult periods. Usingthe macro-structural model MFMod, the paper presents, evaluates, and discusses the strengths and weaknesses ofdifferent oil revenue management mechanisms applied to the specific case of Chad. The scenarios demonstrate that awell-designed management rule can successfully insulate thepublic budget from the oil price cycle, resulting in a significant reduction in the volatility of the economy.

Keywords: Energy Policies & Economics; Public Finance Decentralization and Poverty Reduction; Public Sector Economics; Public Financial Management; Macroeconomic Management; Financial Sector Policy (search for similar items in EconPapers)
Date: 2020-09-17
New Economics Papers: this item is included in nep-ene and nep-mac
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