March 23, 2020
The Africa Centre for Energy Policy (ACEP) is urging the government to draft a new budget in the wake of the COVID-19 outbreak.
According to the policy think tank, a mid-term budget will be too late for many countries to accommodate the full effect of oil price drop and the impacts of COVID-19 outbreak on the national budget.
In its analysis of the implications of the COVID-19 on oil price, ACEP said “A new budget that accounts for the extraordinary drop in oil prices is required for oil producing countries in Africa.
“It is encouraging to see that Algeria has already recognised this fact and is preparing a supplementary budget that will help manage the effects of low oil price.
“This also recognises that a mid-term budget will be too late for many countries to accommodate the full effect of oil price drop and the impacts of COVID-19 outbreak on the national budget.”
It added that in future, governments must implement significant countercyclical mechanisms.
“An option will be for governments to have stabilisation funds with adequate buffer that is capable of smoothening significant shortfalls in the budget. Also, hedging portions of oil outputs will minimise the impacts of oil price volatility on national budgets”, it added.