Publication

This paper examines how aid donors should respond to recipient countries which have gained a windfall from newly discovered natural resources and who are therefore more at the mercy of volatile commodities markets as a source of income. The authors argue that in such cases, donors might reshape their flows of concessional development assistance to provide some insurance against resource booms and busts. They then explore how best to design a program that is able to respond to shocks from volatile commodity markets and how to finance such a program within the often rigid funding constraints faced by the donor.