Countries rich in natural resources are often looked at with envy: they face few financial constraints and that should speed their development path. But the reality is less rosy. Countries with an abundance of natural resources -- typically oil, gas or minerals -- have, on average, performed less well than comparable non-resource rich countries.
That raises one of the perennial questions in economic policy-making. How to manage the economic and social challenges that stem from resource wealth? Or, to borrow the words of Professor Thorvaldur Gylfason (University of Iceland), how to prevent "nature's bounty" from "becoming the curse of the common people"?
Broadening the policy dialogue
While this issue isn't a new one, it is particularly topical for a number of African economies that have new natural resource discoveries about to come on stream. So, in early November, the IMF Institute, in cooperation with the Bank of Algeria, organized a High Level Seminar on Natural Resources in Algiers, focusing on the challen that these countries face, and distilling lessons from countries that have managed their natural resources successfully. The seminar brought together senior officials with experts from academia and civil society organizations.
One of the advantages of being an international organization with a near-global membership is that the IMF is a unique repository of examples of member countries' good and bad policy practices and experiences from which other policymakers can learn and benefit. The IMF is thus well placed to bring together policymakers and experts to discuss what has worked and what has not -- that is, to learn from one another and from history. Participants from Botswana, Chile, Mexico, and Norway discussed what had worked best in their countries, and some other country representatives were quite frank on what had not worked in their experience.
The benefits from "picking each other's brains" were immediately evident in Algiers. Representatives from countries with newly discovered natural resource wealth, such as Ghana and Uganda, had the opportunity to ask direct questions and get advice from experts and from other policymakers about how best to manage resource wealth. Several themes emerged.
Many acknowledged the difficulties of negotiating contracts with big multinational extraction firms about the sharing of exploration costs and the distribution of profits.
A second universal question is how the benefits should be shared between current and future generations.
Underlying these natural resource-specific issues is the need for a stable and predictable macroeconomic environment to enable countries to capitalize on their resource wealth. Here, the views of the IMF were sought on a range of macroeconomic issues -- such as designing fiscal policies, monetary and exchange rate policies for cushioning the volatility of resource revenues, and the efficacy of 'industrial policies' designed to favor specific sectors (for example, through trade policies or budgetary subsidies).
Continuing the dialogue on good policies
While the High-Level Seminar in Algiers provided a rich and varied discussion, it would be naive to think that there might be a 'quick fix' for an issue that countries have struggled with for many years.
But, to the extent that this seminar -- the proceedings of which we plan to publish as a book -- has stimulated policymakers' thinking about both the complexities and successful examples of managing natural resource endowments, it will have met our objectives. What is needed is an ongoing consultative dialogue inclusive of the civil society and a collaborative approach.
We at the IMF are committed to being part of that conversation. In addition to country level policy discussions, we will continue to engage on two broad fronts:
From iMFdirect blog