A stabilization fund is a mechanism set up by a government or

central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...

to insulate the domestic economy from large influxes of revenue, as from commodities such as oil. A primary motivation is maintaining a steady level of government revenue in the face of major commodity price fluctuations (hence the term "stabilization"), as well as the avoidance of

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

and associated atrophy of other domestic sectors (

Dutch disease In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agricultur ...

). This generally involves the purchase of foreign denominated debt, especially if the goal is to prevent overheating in the domestic economy. The notion may overlap with

sovereign wealth fund A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as ...

. Examples of such funds include: * Stabilization Fund of the Russian Federation * Petroleum Fund of Norway (SPF) *

Chile Chile, officially the Republic of Chile, is a country in the western part of South America. It is the southernmost country in the world, and the closest to Antarctica, occupying a long and narrow strip of land between the Andes to the east a ...

's Copper Stabilization Fund (CSF) *

Oman Oman ( ; ar, عُمَان ' ), officially the Sultanate of Oman ( ar, سلْطنةُ عُمان ), is an Arabian country located in southwestern Asia. It is situated on the southeastern coast of the Arabian Peninsula, and spans the mouth of ...

's State General Reserve Fund (SGRF) *

Kuwait Kuwait (; ar, الكويت ', or ), officially the State of Kuwait ( ar, دولة الكويت '), is a country in Western Asia. It is situated in the northern edge of Eastern Arabia at the tip of the Persian Gulf, bordering Iraq to the nort ...

's Reserve Fund for Future Generations (RFFG) *

Papua New Guinea Papua New Guinea (abbreviated PNG; , ; tpi, Papua Niugini; ho, Papua Niu Gini), officially the Independent State of Papua New Guinea ( tpi, Independen Stet bilong Papua Niugini; ho, Independen Stet bilong Papua Niu Gini), is a country i ...

's Mineral Resources Stabilization Fund (MRSF) *

Venezuela Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...

's Macroeconomic Stabilization Fund (MSF) *

UAE The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia (The Middle East). It is located at th ...

Abu Dhabi Fund for Development The Abu Dhabi Fund for Development (ADFD) is a foreign aid agency established by the government of Abu Dhabi in 1971. The fund provides concessionary loans to fund economic and social development projects. The fund also invests in order to expand ...

Central Bank of Iran The Central Bank of Iran (CBI), also known as ''Bank Markazi'', officially the Central Bank of the Islamic Republic of Iran ( fa, بانک مرکزی جمهوری اسلامی ايران, Bank Markazi-ye Jomhuri-ye Eslāmi-ye Irān; SWIFT Code: B ...

's Oil Stabilization Fund Stabilization funds do not necessarily have to revolve around large commodity revenue. Such national funds might instead seek to influence currency exchange rates without affecting domestic money supply. Such examples include: *

European Financial Stability Facility The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the Council of the European Union on 9 May 2010, with the objectiv ...

*United Kingdom's

Exchange Equalisation Account The Exchange Equalisation Account (EEA) is a fund of His Majesty's Treasury in the United Kingdom. It holds the country's the special drawing rights (SDR) held at the International Monetary Fund as well as reserves of foreign currencies and gold. I ...

*United States's Exchange Stabilization Fund

External links

IMF registered stabilization funds
Sovereign wealth funds {{econ-term-stub

See also

External links