Are natural resource abundance and opaque budgets inextricably linked? The Open Budget Survey 2008-a comprehensive evaluation of budget transparency in 85 countries-finds that resource-dependent countries tend to be less transparent than countries that are not resource dependent. They perform considerably less well on the Open Budget Index (OBI)-a comparative measure of the accessibility and comprehensiveness of critical budget information based on a subset of Survey questions. Resource-dependent countries register an average OBI 2008 score of 31 out of a possible 100, compared with 45 out of 100 for non-resource dependent countries. Furthermore, with the exception of South Africa, none of the resource-dependent countries appear among the five top OBI performers.

Budgets are less transparent in oil dependent countries

A closer look at the data reveals that the poor performance of resource-dependent countries is largely driven by the lack of budget transparency and accountability in the 22 countries that are considered significant oil and gas producers. Their average OBI score is just 22 out of 100. Countries that depend on mineral resources register scores that are similar to countries that are not resource dependent (47 out of 100). This underscores the need to understand the specific issues associated with each natural resource-including modes of extraction, size, and revenue management systems. The magnitude of revenues flowing into the budget from the oil and gas sector probably explains some of the difference between hydrocarbon and mineral producing countries.

To explore these issues in greater detail, we analyzed a subset of 55 questions from the Survey that focus on key fiscal policy challenges governments face in managing natural resource revenues. The findings presented in Table 1 point to a widespread inability of oil-dependent countries to manage revenue windfalls. These countries score 25 out of 100 on revenue volatility and forecasting-significantly lower than mineral producers (which score 63 out of 100) and non-resource dependent countries (which score 54).

Oil-dependent countries also appear to have very poor expenditure control systems, which can allow for the mismanagement of resources. These countries’ inability to design long-term plans and link them to medium-term expenditure frameworks and annual budgets may impede economic diversification and poverty reduction. Finally, the fact that revenues derived from oil production and export are often kept out of the budgets of oil-rich countries can further undermine public oversight over how resource windfalls are spent.