Russia’s Reserve Fund, National Welfare Fund up by 1% m/m as of Aug 1.

By bne IntelliNews August 4, 2013

Russian Reserve Fund amounted to RUB 2.807tn as of August 1 2013, going up by 1.3% m/m, FinMin reports. National Welfare Fund also increased by 1.1% m/m to RUB 2.858tn as of Aug 1 2013. In USD terms RF and NWF amounted to USD 85.35bn and USD 86.9bn as of Aug 1, almost flat m/m. To compare, 2012 GDP in current prices was RUB 62.6tn, the Reserve and the National Welfare funds amounting to about 4.5% and 4.6% of GDP, respectively.

Previously this year, both funds were planned to be transferred under the management of to-be established state finance agency RosFinAgenstvo, which was also supposed to manage state debt and pension funds. However, the plans to establish the agency were abandoned and both funds will continue to be jointly supervised by the FinMin and the Central Bank.

This year major changes are expected in the management and investment of the funds. The transfers to the Reserve Fund are going to be cut considerably as the government is pursuing fiscal consolidation and underperforms on tax and privatisation revenues. FinMin is going to cover the missing privatisation revenues with transfers to the Reserve Fund that were originally targeted at RUB 516bn for 2013. At the same time according to the latest estimates by the government out of RUB 427bn targeted privatisation revenues only RUB 60bn will be raised this year. This would make about RUB 367bn to be compensated, cutting the transfer to the Reserve Fund to about RUB 150bn.

To compare: in February 2013 FinMin made a RUB 714bn transfer of the additional oil and gas revenues to the fund, in February of 2012 the Reserve Fund was increased 2.3-fold m/m after FinMin transferred over RUB 1tn of funds accrued from 2011 budget.

As for the National Welfare Fund, it is likely to finance budget-sponsored infrastructural development. At the St. Petersburg Economic Forum in June 2013, the president Vladimir Putin announced the intention to channel at least USD 40bn of the Pension Stabilisation Fund for infrastructure investment. Pension Stabilisation Fund is a part of the National Welfare Fund. The funds are going to be invested into long-term infrastructure projects on a repayable basis, Putin commented. The measure is designed the spur domestic investment that has been stagnating since the beginning of 2013.

It is not clear how the USD 40bn spending announcement corresponds with Putin’s previous pledge to use USD 32bn out of National Welfare Fund to cover the Pension Fund deficit.

At the end of July, the government supported the preliminary package of the stimulation measures designed by EconMin recently headed by ex-central banker Alexei Ulyukaev. EconMin plans to prepare the base for investing the NWF in large infrastructure projects: selection and investment criteria, as well as oversight procedures. 

  Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Feb-13
Ytd Increase in Reserve Fund (RUB, bn) 4,007.2 -2,223.7 -1,054.6 82.7 1,074.1 707.2
Source: CEIC            

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