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IMF projects eased oil prices in 5 years

IMF projects eased oil prices in 5 years
By Joan Chirwa
Wednesday July 09, 2008 [04:00]

AN International Monetary Fund (IMF) study has indicated that oil prices are likely to ease gradually over the next five years, with a wide band of uncertainty. And oil prices yesterday eased to US $143 per barrel after reaching a record high of US $148 per barrel last week. The IMF report states that future markets suggest that oil prices will ease gradually, reflecting a much wider than usual band of doubt.

The report provides a first broad assessment of the impact of the surge in food and fuel prices on the balance of payments, budgets, prices, and poverty of a large sample of countries.

“The recent surges in oil and food prices reflect a confluence of factors. As more resources need to move into the two sectors, prices are expected to ease only gradually from recent highs, but remain subject to considerable uncertainty,” IMF stated.

The IMF further stated that a rise in oil prices is expected to have a larger balance of payments (BoP) effect than a similar food price increase.

This mainly stems from the fact that oil imports are two and half times larger than food imports for low-income countries and twice as large for middle income countries.

“The oil price increase would have a larger balance of payments impact, assuming equal price increases and no behavioural or policy response,” the report stated.

It states that the oil price increase would severely weaken the external position of 81 countries, Zambia inclusive, while the food price increase would have a severe negative effect for 16 countries and the combined price increases for 72 countries. “The latter finding points to a number of countries where the negative oil price increase could be compensated by gains from the food price increase,” stated IMF.

Labels: IMF

posted by MrK @ 3:36 AM