Publication: Designing Oil Revenue Management Mechanisms: An Application to Chad
Loading...
Published
2020-09
ISSN
Date
2020-09-24
Author(s)
Editor(s)
Abstract
Oil resources usually play a significant role in oil-rich countries, in gross domestic product and government revenues. High dependence of government revenues on oil can contribute to severe recession following an adverse commodity price shock, such as in 2014. This paper examines the extent to which a fiscal rule or stabilization fund could translate into a less pro-cyclical fiscal policy, with the government saving part of its oil revenues during periods of high prices and drawing down on the savings during difficult periods. Using the macro-structural model MFMod, the paper presents, evaluates, and discusses the strengths and weaknesses of different oil revenue management mechanisms applied to the specific case of Chad. The scenarios demonstrate that a well-designed management rule can successfully insulate the public budget from the oil price cycle, resulting in a significant reduction in the volatility of the economy.
Link to Data Set
Citation
“Campagne, Benoit; Kitzmuller, Markus; Tordo, Silvana. 2020. Designing Oil Revenue Management Mechanisms: An Application to Chad. Policy Research Working Paper;No. 9402. © World Bank. http://hdl.handle.net/10986/34500 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The State of Global Services Trade Policies: Evidence from Recent Data(Washington, DC: World Bank, 2025-10-28)The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index.Publication It’s Not (Just) the Tariffs: Rethinking Non-Tariff Measures in a Fragmented Global Economy(Washington, DC: World Bank, 2025-10-22)As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape.Publication The Marshall Plan: Then and Now(Washington, DC: World Bank, 2025-10-14)This paper is a product of the Development Policy Team, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Fiscal Systems for Hydrocarbons : Design Issues(Washington, DC: World Bank, 2007)Although host governments and the investors may share one common objective-the desire for the project to generate high levels of revenue-their other goals are not entirely aligned. Host governments aim to maximize the rent for their country over time, while achieving other development and socioeconomic objectives. Investors' aim is to ensure that the return on investment is consistent with the risk associated with the project, and with their corporations' strategic objectives. To reconcile these often conflicting objectives, more and more countries rely on transparent institutional arrangements and flexible, neutral fiscal regimes. This paper examines the key elements of the legal and fiscal frameworks utilized in the petroleum sector and aims to outline desirable features that should be considered in the design of fiscal policy with the objective of optimizing the host government's benefits, taking into account the effect that this would have on the private sector's investment. Chapters 2 and 3 provide background material on, respectively, the stages of an oil and gas project and the type of legal arrangements normally used in the petroleum sector. The relative advantages and disadvantages of the tax and non-tax instruments used in petroleum fiscal regimes are discussed in Chapter 4. Chapter 5 outlines the features of successful fiscal regimes, while system measures and economic indicators are described in Chapter 6. Finally, in Chapter 7, a sensitivity analysis is used to illustrate some typical fiscal systems' design issues.Publication Petroleum Exploration and Production Rights : Allocation Strategies and Design Issues(World Bank, 2009-11-01)Petroleum has become an integral part of today's global economy and a key component of many national economies. Hence, the presence of petroleum in meaningful quantities can have important economic, developmental, and strategic consequences for a country. While a country's petroleum resource base is a gift of nature, translating this resource into saleable crude oil requires investment and effort. Whether governments choose to invest directly or allow private investors to do so, their primary concern should be to maximize the social benefits derived from the exploitation of the resource base. In practice, however, defining what constitutes maximum social welfare is essentially a political question, which helps explain the variety of objectives pursued by governments over time. In order to exploit their natural resources efficiently, many governments rely on private oil companies. Governments have a challenging task in deciding which companies should be awarded the exclusive rights to explore, develop, and produce their resources, and on what conditions such rights should be awarded. There is little empirical documentation on the design and relative effectiveness of alternative systems for the allocation of petroleum exploration, development, and production (E&P) rights and their policy implications. This paper analyzes the available evidence on the advantages and disadvantages of various practices used by petroleum producing countries to allocate petroleum E&P rights, and draws conclusions about the optimal design of E&P allocation systems.Publication The Fiscal Management of Natural Resource Revenues in a Developing Country Setting (or How to Design a Fiscal Rule If You Are Not Norway)(World Bank, Washington, DC, 2012-04)The exhaustibility and volatility of natural resource revenues pose well-known economic challenges, of which those facing oil producers are the most prominent. If oil revenues represent an important share of export earnings and of government revenues, then they can be part of overheating during booms and costly adjustments during downturns, making fiscal policy exacerbate volatility. At the same time, considerations of intergenerational equity suggest that fiscal policy should also preserve part of current oil revenues for future generations. To address both of these challenges, resource-rich countries commonly establish commodity funds, into which part of their resource-linked revenues are deposited and invested in income-generating assets (usually offshore financial assets). A key question in designing such funds is what share of current revenues should be spent and what share saved. Based on recent advisory services offered to the Ministry of Economy and Trade in Kazakhstan, this note summarizes one possible approach, aiming to provide rule-based anchors for sustainable fiscal policy in an oil-producing country. This approach applies traditional permanent-income and debt sustainability frameworks, but adapts the resulting recommendations to the institutional context of the country. Rule-based fiscal frameworks offer strong benefits to countries that are generating significant government revenue from extractive industries. As commitment devices, these frameworks can reinforce fiscally responsible economic management, contain volatility, and preserve fiscal savings for future generations.Publication Natural Oil Companies and Value Creation : Volume 3. Data Set(World Bank, Washington, DC, 2011-03-01)Approximately two billion dollars a day of petroleum are traded worldwide, which makes petroleum the largest single item in the balance of payments and exchanges between nations. Petroleum represents the larger share in total energy use for most net exporters and net importers. While petroleum taxes are a major source of income for more than 90 countries in the world, poor countries net importers are more vulnerable to price increases than most industrialized economies. This paper has five chapters. Chapter one describes the key features of upstream, midstream, and downstream petroleum operations and how these may impact value creation and policy options. Chapter two draws on ample literature and discusses how changes in the geopolitical and global economic environment and in the host governments' political and economic priorities have affected the rationale for and behavior of National Oil Companies' (NOCs). Rather than providing an in-depth analysis of the philosophical reasons for creating aNOC, this chapter seeks to highlight the special nature of NOCs and how it may affect their existence, objectives, regulation, and behavior. Chapter three proposes a value creation index to measure the contribution of NOCs to social value creation. A conceptual model is also proposed to identify the factors that affect value creation. Chapter four presents the result of an exploratory statistical analysis aimed to determine the relative importance of the drivers of value creation. In addition, the experience of a selected sample of NOCs is analyzed in detail, and lessons of general applicability are derived. Finally, Chapter five summarizes the conclusions.Publication Managing Resource Rents : The Special Challenges in Postconflict Countries(World Bank, Washington, DC, 2006-02)Resource flows from extractive industries can be a lifeline for postconflict countries, helping to fund critical reconstruction needs. But these resources present issues not found elsewhere in the economy and need to be well managed. Sector governance principles that apply to oil-producing countries in general are even more important in postconflict countries. This note discusses these principles and shows how they apply in two cases, Timor-Leste and Sudan.
Users also downloaded
Showing related downloaded files
Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.Publication Commodity Markets Outlook, April 2025(Washington, DC: World Bank, 2025-04-29)Commodity prices are set to fall sharply this year, by about 12 percent overall, as weakening global economic growth weighs on demand. In 2026, commodity prices are projected to reach a six-year low. Oil prices are expected to exert substantial downward pressure on the aggregate commodity index in 2025, as a marked slowdown in global oil consumption coincides with expanding supply. The anticipated commodity price softening is broad-based, however, with more than half of the commodities in the forecast set to decrease this year, many by more than 10 percent. The latest shocks to hit commodity markets extend a so far tumultuous decade, marked by the highest level of commodity price volatility in at least half a century. Between 2020 and 2024, commodity price swings were frequent and sharp, with knock-on consequences for economic activity and inflation. In the next two years, commodity prices are expected to put downward pressure on global inflation. Risks to the commodity price projections are tilted to the downside. A sharper-than-expected slowdown in global growth—driven by worsening trade relations or a prolonged tightening of financial conditions—could further depress commodity demand, especially for industrial products. In addition, if OPEC+ fully unwinds its voluntary supply cuts, oil production will far exceed projected consumption. There are also important upside risks to commodity prices—for instance, if geopolitical tensions worsen, threatening oil and gas supplies, or if extreme weather events lead to agricultural and energy price spikes.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.