Poverty-ridden countries reaping the benefits of soaring oil and commodity prices should be investing their wealth at home, not putting it in sovereign funds, a senior United Nations official says.
Record crude and other commodity prices have seen some countries such as Nigeria bank billions of surplus revenue in sovereign wealth funds, which are then reinvested, often in the developed world with the aim of conserving and growing them.
But Salil Shetty, director of the UN's Millennium Campaign - which aims to meet the Millennium Development Goals to halve extreme poverty and boost life expectancy by 2015 - said the money could be much more wisely used domestically. "It doesn't make sense," he told Reuters in an interview on Thursday. "They have so much they need to be concentrating on. Infrastructure, water and sanitation."
The national budgets in many oil producers assumed crude prices of around $60 a barrel. With current prices more than twice that, many producers are simply banking the excess income in their wealth funds.
A report in April from analyst group Global Insight estimated Nigeria's fund grew by 291 percent in the last five years, with fellow African oil producer Angola - still racked by poverty after two decades of civil war - growing 84 percent.
Overall, it estimated sovereign wealth funds grew by 24 percent a year in the last three years led by China, Russia and Kuwait to around $3.5 trillion in 2007, accounting for around 10 percent of private equity investments globally. But overall Shetty said growing commodity prices had helped boost growth and reduce poverty across Africa.
"The direction is right but the speed of movement is inadequate," he said. "But the important thing is that governments fine tune policies so that this growth comes through in terms of poverty reduction. I think because of demand in Asia, commodity prices will remain high, so hopefully Africa should continue to grow even a downturn."
Currently, he said most countries were heading in the right direction of achieving the millennium goals but at the current rates would miss the targets. He complained that even in the "unprecedented prosperity" of recent years, rich countries and firms had done too little to help.
Goals include halving the number of people living on less than a dollar a day, reducing maternal mortality by three quarters and under-five mortality by two-thirds, as well as ensuring free primary education. Rising prices could threaten the process but were also an opportunity, he said. Too many donors had failed to follow through on promises, he said, adding he had some worries as to what would happen to aid flow from some developed nations in an economic downturn.
From Zambia to India, Shetty said the problem was often that good economic growth, often in high single digits, was not feeding through to the entire population, boosting inequality rather than adequately reducing poverty. China had done better but had still seen inequality rise, he said.