"Commodity-dependent countries must plan for boom and bust"

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Commodities are inherently cyclical and governments should prepare for the worst, the UN trade and development agency says.

Oil prices show little sign of returning to former highs of more than USD100 per barrel for some time, experts told a UN forum on Monday.

Speaking at a meeting on commodities at the UN in Geneva, UN Conference on Trade and Development's Samuel Gayi said that governments needed to plan for the "inevitable" boom and bust nature of the raw materials sector.

Daniel Johnson has more.

In his address to delegates, the UN expert described how oil prices had fallen by 50 per cent since June 2014, while other commodities had seen losses of 14 per cent.

Some African nations had managed the boom years by in effect putting money aside for leaner times, Samuel Gayi said.

But the same wasn't true in Latin America, he explained, with the dramatic fall in oil revenues causing food insecurity and unemployment in Venezuela.

"If you are not creating enough decent jobs during the boom years, what will you do when the bust comes….Many of the commodity dependent countries – particularly the petroleum-dependent – are having to deal with that today, and therefore it becomes a challenging immediate policy issue of how to deal with the inevitability of boom and bust cycles in commodities markets."

On the question of reforms in commodity trading, the UN economist said it was "long overdue".

The subject is up for discussion at the UNCTAD forum in Geneva, along with a debate on the need for more disclosure on raw materials transactions.

UNCTAD says this lack of information makes it difficult for countries to make policy decisions and is also potentially damaging for governments and companies.

Daniel Johnson, United Nations

Duration: 1'14"

 

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