Impact of high oil prices on oil-importing countries in Africa
Ralf Krüger, UNECA Project LINK meeting, Fall 2006, Geneva
Structure of presentation 1. 2. 3. 4. Main message Why may they be hit hard? What are the effects? What can be done?
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Main message African net oil importers are potentially hit hard by high oil prices
Economic growth Reaching the MDGs
Why may they be hit hard? 1) They depend on oil
Country Energy source Oil Hydro- Other Biomass produc energy (%) (%) ts (%) (%) 8 5 0 87 60 27 0 13 8 26 1 65 17 5 1 76 45 53 2 NA 93 07 0 NA 7 3 0 90 85 15 0 NA 93 0 7 NA 29 0 0 71 Energy Oil Intensity inten(Gross) sity 57,627 12,692 75,264 44,531 NA NA 120,676 NA NA 34,259 GDP pc (US$)
Tanzania Namibia Zambia Kenya Malawi Burkina Faso Ethiopia C.A.R. Rwanda Togo
4,469 309 7,594 1,845 5,855 354 7,574 341 3,986 157 4,469 253 8,545 102 4,133 229 7,686 260 9,853 292
Source: ESMAP 2005.
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Why may they be hit hard? 2) And are thus highly vulnerable
Oil vulnerability Oil import dependency Energy intensity (net) Oil dependency Debt/GDP GDP per capita (US$)
Source: ESMAP 2005.
SubLatin South Asia Saharan America & Africa Caribbean 0.035 0.021 0.029 0.982 0.478 0.744 11,421 16,507 22,150 0.626 0.510 0.352 0.723 0.504 0.240 294 3,056 504
East Asia 0.045 0.852 19,187 0.530 0.520 1,527
OECD 0.011 0.695 6,819 0.421 NA 25,414
What are the effects?
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If coupled with low foreign reserves:
Decreased import capacity Lower consumption and investment Lower production and employment
Overall modest impact on growth
2004: 4.7%, 2005: 4.5% High commodity prices, improved macro-management, good agricultural performance, improved political governance, continued donor support
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What are the effects?
2/3
Macroeconomic stability prevailed
However, higher oil prices are more damaging for the poor Lower employment prospects Higher inflation (fuel and transportation) Cuts in government spending on social services
What are the effects?
40 30 % of GDP 20 10 0 -10 -20
SSA Oil-exporting 19972001 2002 2003 2004
3/3
Trade balances have worsened
2005
2006
Oil-importing
Land-locked
Source: World Bank 2006.
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What can be done? Reduce the dependence on oil (long term) by strengthening alternative energy sources, mostly hydropower Rationalize the use of oil and improve energy efficiency Sustain macroeconomic stability Donors and IFIs should provide special support
THANK YOU
www.uneca.org rkrueger@uneca.org
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