The Role of Sovereign Wealth Funds in Economic Stabilization and Development

Abstract

This study examines the role of Sovereign Wealth Funds (SWFs) in fostering economic stabilization and long-term development, particularly in the context of developing and resource-dependent economies. Amid rising global uncertainties and commodity price volatility, the effectiveness of SWFs in promoting macroeconomic resilience and supporting national development strategies has drawn increasing scholarly and policy attention. This article systematically reviews recent empirical literature to evaluate how SWFs contribute to fiscal stabilization, reduce revenue volatility, and channel strategic investments in alignment with development goals. The findings highlight that SWFs with transparent governance structures and clear policy mandates are more successful in fulfilling their dual function. Additionally, evidence suggests that countries integrating SWFs into broader economic planning frameworks tend to experience improved economic diversification and resilience. By synthesizing current debates and identifying best practices, this article contributes to understanding how SWFs can be better leveraged to support inclusive and sustainable development in the Global South.