Long abstract

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Fiscal policy has gained credibility, budget targets have been met and the public sector borrowing requirement has come down. But there are important fiscal challenges. The medium-term framework should be strengthened to entrench fiscal rectitude and consistency of fiscal policy over time. In the recent past, a large proportion of extra oil revenue has been spent wisely or saved. Guidelines should be set to deal with the current situation of oil revenues that are high and likely to remain so for some years ahead. These additional resources are not necessarily permanent. Rules should ensure that they serve to increase public sector net worth by reducing the public debt, financing investment and building up a sizeable Oil Stabilisation Fund. There are also development priorities (basic education, health, infrastructure, poverty alleviation) that require additional funding. These recurrent spending needs will have to be financed by permanent sources of revenue. A revenue-enhancing tax reform remains a priority.  Non-oil related revenue is low relative to GDP and even with oil-related revenue (about a third of the total) the tax/GDP ratio is one of the lowest in the OECD.