Sovereign Wealth Funds: Literature Review and the Suriname Experience

This chapter reviews the literature on the benefits, criticisms, and factors that support the adoption of sovereign wealth funds (SWF), with the aim of highlighting key insights for policymakers in Suriname and by extension developing countries. Suriname is a small commodity-based economy that is expected to experience a crude oil boom in the coming years. The country’s experience with previous commodity booms in bauxite and gold did not lead to the desired socio-economic outcomes. One of the key reasons often cited for Suriname’s underperformance is the country’s weak macro-fiscal framework and deficits in governance and institutions. The literature finds that SWFs can be important for managing natural resource revenues, stabilizing public finances, and supporting economic development. Evidence from the literature points to factors such as governance, macroeconomic conditions, and favorable financial conditions, with the presence of Dutch disease as well as oil price shocks being key for establishing SWFs. These findings suggest that Suriname should prioritize macroeconomic stabilization and strengthen fiscal and governance frameworks in the near term, while setting up an effective SWF to better manage the potential windfall oil revenues in the coming years.