Russia dips into the Reserve Fund to cover the budget deficit

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/19

Russia waited until April to tap the Reserve Fund this year, withdrawing a total of 390 billion rubles ($6 billion). At the end of April, the Reserve Fund held assets worth 2.9 trillion rubles ($45 billion). The plan this year is to withdraw a total of 2.1 trillion rubles to cover the budget deficit, but more money might be needed if oil prices remain flat and budget is not amended. Some 1.3 trillion rubles were withdrawn from the Reserve Fund last year.

The National Welfare Fund held assets of 4.8 trillion rubles ($74 billion) at end-April. About a third of that was held in less liquid assets like long-term bank deposits or debt securities of Russian firms, while the rest consisted of highly liquid foreign-currency securities. The National Welfare Fund was originally established to fund the pension system, not budget deficits. In recent economic discussions and the economy ministry’s latest forecast, however, both funds are lumped together as a source for financing budget shortfalls.

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