Management of Oil Wealth Under the Permanent Income Hypothesis: The Case of São Tomé and Príncipe

Author/Editor:

Alonso A Segura Vasi

Publication Date:

July 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper documents the protracted process of shaping the rules governing oil operations in São Tomé and Príncipe. It analyzes the institutional framework for oil sector development, which applies Milton Friedman's permanent income hypothesis to the management of oil resources. São Tomé and Príncipe is the first country in Africa to adopt this rule. Finally, the paper offers a preliminary quantitative analysis of the impact of oil sector development on government consumption and savings. It shows that the country's oil wealth could be significant, which would enable sustainable government consumption and intergenerational equity through a gradual buildup of the Permanent Fund for Future Generations.

Series:

Working Paper No. 2006/183

Subject:

Government consumption Oil Oil prices Oil production Oil, gas and mining taxes

English

Publication Date:

July 1, 2006

ISBN/ISSN:

9781451864434/1018-5941

Stock No:

WPIEA2006183

Pages:

34

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