Note on the Fiscal Implications of Strategic Investment Funds

Stanford Global Projects Center Working Paper Series July 2019

15 Pages Posted: 10 Jul 2019 Last revised: 27 Jan 2020

Date Written: July 9, 2019

Abstract

Strategic investment funds (SIFs) are instruments of economic and financial policy, and the operations of these funds have important fiscal implications. A SIF’s fiscal implications span the full cycle of its operations, from funding, through capital allocation, to operations and maintenance of the invested assets. SIFs with a capacity to deploy capital efficiently have the potential to increase the effectiveness of the public expenditure programs in the SIFs’ respective home countries. However, the establishment and operations of SIFs also carry important fiscal risks, which need to be recognized and addressed. This note considers the flows of capital into and out of SIFs, the relationship of these flows to the fiscal framework and macro-fiscal context of the SIFs’ home countries, as well as fiscal liabilities that can result from SIFs’ activities, and from their possible insolvency and bankruptcy. The note offers suggestions for how these risks can be mitigated.

Keywords: Strategic investment funds, sovereign wealth funds, fiscal management, fiscal risk, fiscal liabilities, sovereign debt

JEL Classification: G23, G28, H30, H81, O23

Suggested Citation

Halland, Havard, Note on the Fiscal Implications of Strategic Investment Funds (July 9, 2019). Stanford Global Projects Center Working Paper Series July 2019, Available at SSRN: https://ssrn.com/abstract=3417086 or http://dx.doi.org/10.2139/ssrn.3417086

Havard Halland (Contact Author)

OECD Development Centre ( email )

94, rue Chardon Lagache
Paris, 75775
France

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