1 / 25

Impact of High Oil Prices on Africa

This report discusses the evolution of oil prices and its expected impacts on Africa. It explores the effects on economic growth, inflation, fiscal balance, external financing gap, and terms of trade. Policy implications for both net oil importers and oil-producing countries are also highlighted, along with the role of donors and development partners. The report concludes by emphasizing the need for appropriate short-term and long-term measures to cope with oil price increases.

myersh
Download Presentation

Impact of High Oil Prices on Africa

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Impact of High Oil Prices on Africa2nd Meeting of the Infrastructure Consortium for Africa, Addis Ababa,19-20 June 2006

  2. Outline Evolution of the price of oil Expected Impacts Policy Implications Conclusion

  3. Trends in price of crude oil • The price of oil is expected to remain high because of Asia’s strong economic performance. • Between 1990 and 2003, the demand for oil grew by 7% annually in China and India and by 1.3% in the world.

  4. Impacts of high oil price on . • Growth • Inflation • Fiscal Balance • External financing gap • Terms of Trade

  5. Impact on Growth: Oil exporters key beneficiaries Source: AEO 2005-06; (e) estimates; (p) projection.

  6. Considerable variations among the oil producing countries Performance of oil producers (%) (%) Source: African Economic Outlook 2006

  7. But some oil importers performed better than expected Best Performers in 2005 (%) (%) Sources: African Economic Outlook 2006

  8. Thanks to rising commodity prices and increased production Sources: African Economic Outlook 2006

  9. Inflation Effects ...

  10. Fiscal Balance: Oil importers recording deficits Source: AEO 2005-06; (e) estimates; (p) projection.

  11. Overall fiscal position …

  12. External balances are generally good and improving……

  13. But oil importers adversely affected …

  14. Policy implications for net-oil importing countries • Fiscal policy and poverty • No evidence that subsidizing petroleum is welfare improving • Subsidizing – or reducing VAT – on kerosene can soften the blow on the poor. Caution: Long run sustainability of subsidies? • Monetary policy • Advisable to adopt a non-inflationary monetary policy to avoid hyperinflation and maintain monetary credibility. • Capital account management • Obtain funds from private markets, bilateral and multilateral sources which are consistent with debt sustainability. • High oil prices should be viewed as a signal to use renewable energy: December 2005 AfDB approved a $5.5 million grant for 250 solar-powered boreholes in Madagascar.

  15. Policy Implications Cont’d • Technical assistance and donor financial support • Establishing a Global Oil Fund? • Coordinated action by donors (bilateral, multilateral and emerging) is required.

  16. Policy implications for oil producing countries • Sound and transparent management of the extra oil revenue. • Make provision for future generations, e.g. savings fund. • Invest in human and physical capital to increase their production possibilities. • Avoid the misallocation of resources to preclude the so-called Dutch disease.

  17. Conclusion • Impacts of high oil price differ between net oil importers and oil exporters • Appropriate measures are needed to assist net oil importers in the short run, but long term policy measures are required to cope with oil price increases • For oil exporters, management and better utilisation of the oil windfall -- key to sustainable growth • Role of the donors and development partners crucial

  18. Thank you for your attention

  19. Agenda • 1 Energy access and security and Africa • 2 Challenges and opportunities in water resource management • 3 Summing up and close

  20. Agenda • 1 Energy access and security and Africa • 2 Challenges and opportunities in water resource management • 3 Summing up and close

  21. Thank you

More Related