How Effective are Oil Funds? Managing Resource Windfalls in Azerbaijan and Kazakhstan

Abstract

Norio Usui writes that the recent surge in global commodity prices has brought large windfall revenues to resource-rich economies in Asia. Booming economies have, however, faced challenges of macroeconomic stabilization and intergenerational income distribution, and sought a solution to setting up a separate fund outside the budget. This brief assesses the experiences of Azerbaijan and Kazakhstan in their oil revenue management, and concludes that if there is insufficient control of expenditure or deficits, setting up an oil fund by itself does not guarantee either a prudent stance on overall fiscal management or commitment to savings for future generations.