Managing Resource Revenues in Developing Economies

Paul Collier, Frederick (Rick) van der Ploeg, A. Spence and Anthony Venables

IMF Staff Papers, 2010, vol. 57, issue 1, 84-118

Abstract: This paper addresses the efficient management of natural resource revenues in capital-scarce developing economies. It departs from usual prescriptions based on the permanent income hypothesis and argues that capital-scarce countries should prioritize domestic investment. Because revenue streams are highly volatile, governments should protect consumption from shocks by increasing it only cautiously. Volatility in domestic investment can be moderated by a buffer of international liquidity, but it is also important to structure investment processes to be able to cope efficiently with substantial fluctuations. To date, most of the resource-rich countries of Africa have not had investment rates commensurate with their rate of resource extraction.

Date: 2010
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