Fiscal rules—permanent quantitative constraints on government finances—are an important tool to help mitigate the macroeconomic challenges associated with managing natural resource revenues. This paper sheds light on large gaps in compliance and oversight of fiscal rules, and provides policy recommendations on how fiscal rules can be further strengthened.
In many oil-producing countries, the government receives a physical share of production, and that oil is then typically sold by the national oil company (NOC). These trading transactions are currently subject to limited regulation and even fewer reporting requirements.
Emerging economies, their governments and their companies, are playing an increased role in oil, gas and mining production - both within their own borders but also outside in other countries and regions.
Over the past decade, the boom in commodity prices and the growth of foreign exchange reserves have made Sovereign Wealth Funds (SWF) major forces in the global economy, with the largest funds managing well over $4 trillion in assets.
The sale of crude oil by national oil companies (NOCs) generates a large share of government revenue in oil-producing countries. NOC export sales bring in more than two-thirds of total government income in countries such as Angola, Azerbaijan, Congo-Brazzaville, Iraq, Saudi Arabia and Yemen.
In order for Russia to create a more diversified and stable economy, the government must change how it manages the enormous profits it earns from oil and gas—money that accounts for a quarter of Russia's GDP, half of the federal budget revenues and three-quarters of all exports.