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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
As shown by America’s efforts to redesignate federal government buildings and office furniture as a sovereign wealth fund, a country doesn’t need to run budget surpluses to swim in the SWF pool. One example is Turkey, rarely considered the poster child for successful economic policy, which established a $190bn strategic SWF in 2017.
This got us wondering how many other countries out there with SWFs have run persistent budget deficits. The answer is a lot.
In fact, of the 68 countries that make this year’s GlobalSWF top 100 for which we have IMF macroeconomic data, only 13 had a budget balance that averaged positive over the last five years and only nine averaged positive over the last ten years.
Admittedly, this total includes some of the most famed sovereign wealth investors like Norway, the United Arab Emirates, Qatar, Singapore, and [checks notes] Nauru. But there are plenty of big funds owned by states that run fairly persistent budget deficits, including Saudi Arabia, China, and Australia.
Below is a rather wonderful dataviz of all of our findings. Hover your pointer over a circle (sized by SWF assets, and coloured by the ratio of SWF assets to GDP) to see the details for different countries.
Admittedly, 68 is not very many datapoints. But it’s noticeable that the biggest funds tend to be owned by states who persistently export more than they import, irrespective of whether their government’s spending is covered by tax revenues.
Current account surpluses — the sum of a country’s trade surplus and its net factor income (like interest, dividends and remittances) — look like they matter more to SWF owners than budget surpluses. And given that current account surpluses must also translate into the accrual of net claims on the rest of the world, this kind of makes sense.
Further reading:
— What would be in a MAGA fund? (FTAV)
