April 14, 2015/IMF Blog

 Benedict Clements and Marta Ruiz-Arranz

Plunging oil prices have taken the public finances on an exciting ride the past six months. Oil prices have fallen about 45 percent since September (see April 2015 World Economic Outlook), putting a big dent in the revenues of oil exporters, while providing oil importers an unexpected windfall. How has the decline in oil prices affected the public finances, and how should oil importers and exporters adjust to this new state of affairs?

In the April 2015 Fiscal Monitor, we argue that the oil price decline provides a golden opportunity to initiate serious energy subsidy and taxation reforms that would lock in savings, improve the public finances and boost long-term economic growth.

A sword that cuts both ways

For oil exporters, the decline in prices is expected to cut their revenues by an average of 4 percent of GDP in 2015.