Botswana, DRC and Zambia most vulnerable to ‘resource curse’
Oxford Policy Management published a new report explaining how low- and middle-income countries are becoming increasingly vulnerable to the “resource curse.”
The study charted the mineral dependence of nearly 100 countries since 1996 to assess their vulnerability to the resource curse, which it explains as “the paradoxical situation in which resource-rich countries suffer from stagnant growth or even economic contraction, as well as institutional problems such as corruption and weak public service delivery.”
“Mineral-dependent countries run the risk of economic problems, such as over-valued exchange rates, which can make other industries’ exports uncompetitive, and corruption because of sudden large ‘windfalls’ of cash,” says the report’s author, Dan Haglund. “Moreover, the greater the dependence, the greater the vulnerability to a fall in commodity prices or demand for minerals during a global economic downturn. This can create political instability and lower growth in low- and middle-income countries, at a time when global economic growth increasingly depends on these countries.”
The three countries most vulnerable to the resource curse are Botswana, Zambia and the DRC. Others include Bolivia, Burkina Faso, Ghana, Guyana, Lao PDR, Mali, Mauritania, Mongolia, Papua New Guinea and Tanzania.
Among its key findings, the study notes that since 1996 the number of countries depending on minerals for over a quarter of export revenues — the World Bank’s definition of export dependence — has increased by one third, to 61 countries. About three quarters of all 95 mineral-dependent countries were considered low and middle income.
The degree of mineral dependence has increased substantially since commodity prices started to rise steeply after 2004 says the report, with an average increase of 12.3% in 1996 to 16% in 2010.