Oil funds should not be allowed to spend: IMF

Oil funds that have been proliferating as a result of the tripling of average energy prices between 1999 and 2006 should not have the authority to spend the revenues earned, according to a study by the International Monetary Fund (IMF).

Instead, the earnings of the oil funds – whose aims include stabilisation, financial savings, asset management and fiscal transparency – should be integrated with the budget to enhance fiscal policy co-ordination and public spending efficiency, the study ‘Oil Boom Test Producing Countries’ has suggested.
Oil funds “should not have authority to spend and the financing should be preferred to funds with rigid rules,” said the study, authored by Rolando Ossowski, Mauricio Villafuerte and Paulo Medas of the IMF Fiscal Affairs Department.

Though oil funds typically have rigid operational rules for depositing and withdrawing resources, evidences showed that in a number of cases rigid oil fund rules had been changed, said the study that covered nations, including Qatar, where oil revenues accounted for at least 20% of total fiscal revenue.

“As oil prices have risen, oil funds are increasingly focusing on long term saving objectives. The resources of some oil funds are earmarked for specific purposes,” it said.
The average oil price tripled from $18 a barrel in 1999 to $53 in 2005 and rose further in 2006, it said, adding the associated increase in oil exports and fiscal oil revenues had had major macroeconomic and fiscal implications for oil producers that heavily depend on oil incomes.

Gulf Times