How do natural resource revenues affect the quality of public spending in developing countries?

Abstract

Over the last decade many poor countries have seen huge increases in revenue from the export of oil, gas and minerals as a result of rising global commodity prices. Although this income provides a significant opportunity to reduce poverty and inequality, public spending in affected countries has often been unproductive. Competition for resources can also catalyse new forms of social and economic conflict.

Centre for the Future State research explored the experiences of Ecuador, Bolivia and Peru in managing the boom in natural resource revenues between 1995 and 2008. All benefitted from windfall revenues from the export of their main commodities: oil in Ecuador, minerals in Peru and gas and oil in Bolivia. The research considered the political and institutional arrangements in place prior to and during the boom and their impact on strategies adopted for allocating and managing natural resource revenues.

It was apparent that pre-existing political and institutional features, and not only policy prescriptions, affected the impact of the revenue windfall, of fiscal shocks and of formal mechanisms introduced to manage resource revenues.

Key messages for policy makers are discussed.

Citation

Institute of Development Studies, Brighton, UK, 4 pp.

How do natural resource revenues affect the quality of public spending in developing countries?

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