Oil Prices Uncertainty To Devastate Africa Oil Producers Economy – IMF

The International Monetary Fund(IMF) has warned oil producers in sub-Saharan Africa to target fiscal surpluses to buffer themselves against large price shocks, lower their debt risks and manage the transition away from fossil fuels.

“We are in a much more shock-prone world. We are in a much more shock-prone world’,” the deputy director of the lender’s African Department, Catherine Pattillo,  said in an interview in Washington.

To better prepare for sharp price swings the cost of crude fluctuated from lows of $23 per barrel to a peak of $115 over the last two years alone countries should “during good times think about saving and aiming for manageable fiscal surpluses,” Pattillo said.

Sovereign wealth funds in the region’s oil exporters including in top producers Angola and Nigeria hold assets of about 1.8 per cent of gross domestic product, compared with about 72 per cent in the Middle East and North Africa, the Washington-based lender said in a report published Friday alongside its regional economic outlook.

The IMF’s modeling suggests the average oil producer needs to accumulate buffers of about 5 per cent to 10 per cent of GDP, or annual surpluses of as much as 1 per cent per annum, over a 10-year period to insure against adverse price shocks and revenue shortfalls that may occur over three years.

Buffers will also help the region’s crude exporters navigate the global transition toward clean energy, which will see their oil income as percentage of total revenues drop by a quarter of their current level by the end of the decade and more than half by 2020, the IMF said.