BOFIT Viikkokatsaus / BOFIT Weekly 2017/03

The value of the Reserve Fund fell from about $50 billion at the end of 2015 to $16 billion (972 billion rubles) at the end of 2016. The amount drawn down from the Reserve Fund was anticipated in the budget. Government spending in Russia typically spikes at the end of the year, and over 40 % of the withdrawals from the Reserve Fund last year took place in December. The government also credited from slightly over $11 billion in income from the sale of a 19.5 % stake in Rosneft to the December budget figures. Even by previous years' standards, however, government spending was exceptionally high in December. Russia provided 800 billion rubles (about $13 billion) to defence firms to pay back their bank loans guaranteed by the state (see BOFIT Weekly Review 44/2016). The move is intended to assure that defence contractors are able to borrow money and operate.

As always intended, assets from the Reserve Fund were used last year to cover the budget deficit. Finance minister Anton Siluanov said the federal budget deficit last year was 2.95 trillion rubles, or about $44 billion. That corresponded to 3.6 % of GDP, slightly below the budget forecast of 3.7 %.

The value of Russia's other sovereign oil savings fund, the National Welfare Fund, stood at $72 billion at the end of 2016. Of that, about two-thirds is invested in highly liquid securities. The combined value of the liquid funds of the Reserve Fund and National Welfare Fund equals roughly 4.9 % of GDP. The federal budget deficit this year is forecast to be 2.753 trillion rubles or 3.2 % of GDP if the oil price in 2017 averages $40 a barrel. Urals crude currently is selling at $52–53 a barrel. If the oil price remains at its current level for the rest of the year, the deficit might shrink by about 1.5 percentage points of GDP.