Sovereign Wealth Fund

The Sovereign Wealth Fund (SWF) of Papua New Guinea is a national fund that has been established to support the country’s macroeconomic stabilisation, government development goals, and asset management related to natural resource revenue. The SWF is made up of two funds: the Stabilisation Fund and the Development Fund. The Stabilisation Fund is used to manage fluctuations in mineral and petroleum revenues, and all such revenues, earnings from investments, and government contributions are paid into the Fund. Withdrawals from the Stabilisation Fund are limited to the 15-year long-term moving average of mineral and petroleum revenues as a share of non-mining revenue and must go through the National Budget. Given the circumstances in Papua New Guinea, the most important considerations for the SWF are macroeconomic stabilisation, avoidance of Dutch disease, asset management, and savings for future generations. To achieve these objectives, three likely models are proposed: Stabilisation Funds, Savings Funds, and Financing Funds. The most suitable model for Papua New Guinea is an offshore Financing Fund, which has more flexible operational rules and can support the government’s development and investment objectives directly.

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