Stabilization fund


A stabilization fund is a mechanism set up by a government or central bank to insulate the domestic economy from large influxes of revenue, as from commodities such as oil. A primary motivation is maintaining a steady level of government revenue in the face of major commodity price fluctuations, as well as the avoidance of inflation and associated atrophy of other domestic sectors. This generally involves the purchase of foreign denominated debt, especially if the goal is to prevent overheating in the domestic economy. The notion may overlap with sovereign wealth fund.
Examples of such funds include:
Stabilization funds do not necessarily have to revolve around large commodity revenue. Such national funds might instead seek to influence currency exchange rates without affecting domestic money supply. Such examples include: