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Resource Funds: Another Side of the Austerity Die

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  • Salewa Olawoye

Abstract

This article analyzes the trend of resource funds adoption among extraction economies. Using commodity-based sovereign wealth funds as a reference point, the article analyzes Norway’s success story in using its funds to foster development and its influence in Sub-Saharan Africa. The prevalent investment strategy of savings in financial assets abroad could be ideal, especially with respect to the intergenerational wealth transfer. However, this is not advisable for a country that still lacks basic needs. The austerity-like measures introduced to build these funds entail a reduction in current spending and/or an increase in natural resource taxes. The aim is to show that this system of hoarding, rather than reinvestments, poses several risks that a developing country cannot afford.

Suggested Citation

  • Salewa Olawoye, 2018. "Resource Funds: Another Side of the Austerity Die," International Journal of Political Economy, Taylor & Francis Journals, vol. 47(2), pages 112-129, April.
    • Handle: RePEc:mes:ijpoec:v:47:y:2018:i:2:p:112-129
    DOI: 10.1080/08911916.2018.1497469
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    Cited by:

    1. Sayadi, Mohammad & Khoshkalam Khosroshahi, Musa, 2020. "Assessing Alternative Investment Policies in a Resource-Rich Capital-Scarce Country: Results from a DSGE analysis for Iran," Energy Policy, Elsevier, vol. 146(C).

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