Enabling Resilience in Unprecedented Times

The coronavirus pandemic has hit the economies of many resource-rich countries with unprecedented impact. The drop in oil prices that coincided with, and was exacerbated by, the pandemic has left oil-dependent states with deep holes in their national budgets, at a time when they desperately need funds for healthcare and economic recovery. While oil producers may face the starkest challenges, many mineral producers have also experienced drops in demand, price and production driven by the pandemic.

For decades, commodity price crashes have caused periodic economic shocks to those countries that rely on the extractive sector for domestic revenue. But the economic slowdown caused by the coronavirus pandemic is unmatched in modern history. Governments of resource-dependent countries cannot act as in the past, riding out price drops while making familiar (but rarely delivered) promises to reform resource governance, increase national savings and diversify their economies. 
 
The pandemic’s tsunami of economic impacts washes over a world already beset by a climate crisis and facing the imperative of a transition to cleaner energy. Too many oil and gas producers are not adapting to the reality of the transition, and the pandemic has thrown into sharper relief the challenges they face. But the changes these countries must make will be harder to achieve now, as all sectors of the economy contract. Nevertheless, delay will only make matters worse. The time for action is now.
 
We know the challenges are greatest for countries that are resource-dependent. Dependency is often defined in economic terms – dependency on resource for revenues, exports and foreign exchange. But dependency is frequently characterized by phenomena that significantly undermine sustainable and equitable development in countries endowed with oil, gas and minerals. These include political manipulation of citizens’ expectations of future resource wealth, excessive borrowing against future production, and creating opaque state-owned companies that drain revenues while amassing undue influence. Helping dismantle the structures – domestic and international – that keep countries dependent on extraction is vital to their resiliency. However, this is not only an issue in established producer countries; the traits of dependency can take hold in new or prospective producers and the foundations for dependency may be laid well before any production takes place.
 
The decisions that key players in resource-dependent countries take now will have long-term consequences. More than ever, civil society actors must push for informed debate on how their countries will be impacted by the energy transition, the perils of dependence on extractives and scrutinize the choices governments are making. Through public debate and dialogue, we must shift old and often politicized narratives around natural resources that drive bad decision-making.
 
These times demand new thinking, and NRGI is determined to work with our partners to contribute to the emergence of a new paradigm for managing non-renewable resources. We will offer analysis to understand the changing context; advocate for next level transparency, not only around extractive sector decision-making by governments and companies, but also in areas that remain shrouded in secrecy; and support debate about how to accelerate the energy transition and reduce or avoid dependency on non-renewable resources. We do not have all the answers, but remain committed to bringing cutting-edge resource governance ideas to the unprecedented challenges facing resource-dependent countries and their citizens.

Audrey Gaughran is senior director for regional programs at the Natural Resource Goverance Institute (NRGI). Suneeta Kaimal is interim president and CEO at NRGI.

Explore NRGI's in-depth analysis of the impacts of the coronavirus pandemic on resource-dependent countries here.

Photo: "Manik, a solar pump operator" (CC BY-NC-ND 2.0) by World Bank Photo Collection