How Can Sovereign Wealth Funds Mitigate Natural Capital Depreciation in Developing Countries?

Edward B. Barbier & Jo Burgess

Published: December 2018

Key indicators of economic performance for resource-rich developing economies are net national income and savings that are adjusted for natural capital depreciation. These indicators vary inversely with the reliance of developing countries on primary product exports, suggesting that highly resource-dependent economies are not expanding physical and human capital sufficiently to compensate for declining natural capital. Natural resource-based sovereign wealth funds can mitigate the impacts of natural capital depreciation on the economic performance of resource-dependent developing economies. But to do so, the overall management practices, governance and transparency of these funds must improve.