The concept of the resource curse suggests that countries rich in natural resources often experience slower economic growth compared to those with fewer endowments. This phenomenon is frequently attributed to overreliance on commodity exports, which can lead to currency appreciation, weakening other sectors like manufacturing. Additionally, windfall revenues from resource booms often result in increased government spending, sometimes inefficient or poorly targeted, undermining long-term fiscal stability. Economic diversification becomes challenging when public budgets swell due to resource income, reducing incentives for structural reforms. Volatility in global commodity prices further exacerbates budget planning, leaving economies vulnerable during downturns. Policymakers are urged to adopt prudent fiscal frameworks, such as sovereign wealth funds or spending rules, to insulate economies from boom-bust cycles. These mechanisms can help channel resource revenues into sustainable development and reduce dependency on extractive industries.
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Easy money, easy spending: A new take on the resource curse CEPR
Easy money, easy spending: A new take on the resource curse CEPR