The International Monetary Fund (IMF) advises African oil-producing countries such as Angola and Equatorial Guinea to set aside 5 to 10% of their Gross Domestic Product (GDP) to manage price fluctuations.

“Oil exporters in sub-Saharan Africa should aim to maintain savings of 5 to 10 percent of GDP to manage large oil price fluctuations,” the IMF writes in an opinion piece, in which it points out that “this means they need to maintain budget surpluses of up to 1 percent of GDP per year for up to 10 years.”

In the opinion paper signed by economists from the African department Hany Abdel-Latif, Henry Rawlings, Ivanova Reyes and Qianqian Zhang, it is recalled that oil prices in international markets have ranged from $23 per barrel to more than $120 over the past two years, “resulting in high uncertainty about oil revenues in economies dependent on this commodity.”

However, they warn, “most oil exporters in the region have not accumulated sufficient savings to protect themselves against the unpredictability of oil prices,” which is compounded by the fact that in sub-Saharan Africa sovereign wealth funds only hold reserves worth 1.8% of GDP, compared to 72% held by similar funds in the Middle East and North Africa, “forcing countries to take on debt or reduce financial assets when prices fall.”

Thus, they conclude, the result is that because of these shortfalls “oil producing countries in the region have grown 2 percentage points slower per year than other countries, with debt service costs being almost double those of other sub-Saharan African countries.”

In the article, the African department’s economists also leave a warning regarding the energy transition to less polluting sources: “by 2030, oil revenues in the region could fall by 25% and by 2050 they could fall by half, so building ‘financial cushions’ now would help exporters enter the energy transition and manage price fluctuations at the same time.”