Lessons from Resource-Rich Developing Countries About Using Their Resource Revenues for Improved Public Service Delivery

Abstract

This rapid review synthesises the literature from academic, policy, and knowledge institution sources on how resource-rich developing countries use their resource revenues for improved public service delivery. Such lessons are particularly important for low-income countries that are in a transition phase of increased resource revenues in total revenues. The question is how they can build their institutions to ensure that resource revenues are used in an effective way to improve public service delivery and public investments. The literature is clear that governments in resource-rich developing countries, particularly with capital constraints, need to be careful not to fall into the trap to over-consume and over-invest during boom periods as this inevitably results in a collapse in public spending when resource prices are low. To assure stable budgets over a longer period, which is important for investor confidence in the country and to stabilise social spending, fiscal policies must challenge shortterm and middle-term pro-cyclical fiscal policies, boom-bust macroeconomic growth cycles, and sharp exchange rate appreciation that make non-resource exports vulnerable.