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Why Countries Rich in Resources End Up Poor

Article written by guest writer Rin Mitchell

What’s the Latest Development?

In several African countries new natural resources have turned up, but experts believe it doesn't necessarily mean they will be less poorer than before the discovery of the resources. It can be a blessing or a curse. Countries that are rich in natural resources and revenue rely on them to finance education, health care, development and redistribution. Yet, they grow more slowly and with “great inequality.” Three of the well-known curses are: strong currencies, which impede other imports, rise in unemployment due to resource extraction and volatile prices of resources that cause instability. “Moreover, resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer.” 

What’s the Big Idea? 

To be rich in natural resources can cause problems politically and economically, unless the right measures are taken. Some ways to avoid such curses are lowering the exchange rate, stabilizing funds, taking the necessary precautions with resource revenue investments, ban borrowing and allowing citizens to see the money coming in and going out. “Newly enriched countries need to take several more steps in order to increase the likelihood of a ‘resource blessing.’” 

 

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