National Revenue Funds

The paper examines how National Revenue Funds (NRFs) can mitigate the 'resource curse'—the negative correlation between natural resource wealth and economic growth. It argues that while NRFs can theoretically smooth expenditures and prevent 'Dutch Disease', their success depends more on the political-economic environment and institutional strength than on technical design. The author suggests that in countries with weak institutions, NRFs should be established through nation-wide multi-stakeholder consultations and given constitutional status to prevent unilateral government manipulation.

• Commodity-dependent countries often suffer from pro-cyclical expenditures, where government spending increases during booms and contracts during busts, leading to 'go-stop' public investments and debt accumulation.
• The 'resource curse' is primarily driven by poor management of windfall revenues and 'Dutch Disease', where currency appreciation during booms reduces the competitiveness of manufacturing and agriculture sectors.
• National Revenue Funds (NRFs) generally take two forms: stabilization funds, which act as a buffer against short-term price drops, and savings funds, which preserve wealth for future generations.
• Empirical evidence suggests that NRFs are not a substitute for fiscal discipline; they are most successful in countries with existing strong commitments to macroeconomic management and democratic transparency, such as Norway and Botswana.
• Common design failures in NRFs include creating savings-based funds that do not restrict overall government expenditure, allowing governments to accumulate savings while simultaneously increasing debt through borrowing.
• Poor investment strategies in NRFs often involve saving in national banks or investing in domestic securities, which increases vulnerability to internal political pressure and rent-seeking.
• Externally imposed NRF models, such as the one the World Bank implemented in Chad, are often unsustainable because they fail to align with local political-economic incentives and may be viewed as infringements on sovereignty.
• To ensure the legitimacy and sustainability of NRFs in developing countries, the author recommends a nation-wide multi-stakeholder consultation process to draft revenue laws and granting those laws constitutional status.

APA

Asfaha, S. G. (2007). National Revenue Funds. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_price_nat_rev_funds.pdf

Chicago

Asfaha, Samuel G. National Revenue Funds. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_price_nat_rev_funds.pdf.

Wikipedia

{{cite report |last1=Asfaha |first1=Samuel G. |title=National Revenue Funds |publisher=International Institute for Sustainable Development |date=August 2007 |url=https://www.iisd.org/system/files/publications/trade_price_nat_rev_funds.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{asfaha2007national, author = {Asfaha, Samuel G.}, title = {{National Revenue Funds}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = aug, url = {https://www.iisd.org/system/files/publications/trade_price_nat_rev_funds.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }