8. Revenue Management and Allocation

Once EI revenues have been generated and collected, government must decide on their management and allocation. Options include spending or saving, with decisions required on appropriate channels or mechanisms for each. The volatility of resource revenues presents a special challenge, addressed in many countries through resource funds. Sharing of resource revenues among levels of government and regions is increasing common and requires careful balancing of pros and cons.

The preceding chapters have dealt with the generation and collection of resource revenues. This chapter deals with the issues relating to the management and distribution of revenue derived from EI sector projects. Once a state has begun to develop its EI sector, the work of managing and budgeting resource revenue from such operations will begin. For many resource-rich states ‒ both big and small, the task of properly managing its resource wealth has been a challenge. This chapter will discuss some of the reasons why revenue management and allocation has proven challenging, and what good practice can recommend for avoiding common pitfalls.

The importance of the subject contained in this chapter cannot be exaggerated. Accordingly, “[s]ince oil revenues are to a large part concentrated in the public sector, the question of how the oil revenue should be spent and distributed across present and future generations becomes key to any economic development.”[1]  This statement applies to all activities in the EI sector, and should not be limited to oil production. With that said, government authorities are often faced with a number of options with respect to the allocation of EI sector revenues. These options tend to fall under two general headings: spending (comprising consumption and investment); or saving (through debt reduction or asset accumulation).

 

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  • Ahmed: Bolivia in the 1980s: I spent some time studying this issue in the past and from my notes this is a summary. At the time of the hyperinflation, Bolivia's economy was very narrowly composed. Its non-traded goods sector was dominated by the service… read more