Russia charts near depletion of Reserve Fund next year

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/44

Under the current federal budget draft, 90 % of the budget deficit will be financed with money from the state Reserve Fund. The finance ministry estimates that the Reserve Fund would be depleted by the end of 2016 to a level that corresponds to 1.3 % of GDP. The finance ministry reports that the Reserve Fund held assets equal to 6.4 % of GDP at end-September and that the Fund is on track to shrink to 4.6 % of GDP by the end of this year. The contraction of the Reserve Fund’s value this year has slowed in ruble terms with the decline in the ruble’s exchange rate.

There are no plans at the moment to borrow nothing more than a tiny bit from the National Welfare Fund to finance the deficit (i.e. the situation remains similar to previous years). Under the latest budget proposal, the National Welfare Fund will still have assets corresponding to 6 % of GDP at the end of next year. It will also not be used very much to finance e.g. infrastructure projects or corporate support by acquisition of equity stakes. Possible investment in loans and shares do not alter the size of the fund, but remain on the fund balance sheet as receivables (although they extend maturities of receivables and may increase fund risk).

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