The Russian government has tightened the use of National Welfare Fund (NWF) for financing infrastructure projects. The government will only allow reserve funds held in the NWF when the liquid part of the fund is bigger than 7% of GDP, Prime Minister Dmitry Medvedev ordered on February 16.
The new rules are designed to extend the life of the fund after its sister fund, the Reserve Fund was completely spent down at the start of 2017 on supporting the budget.
Now resources from the NWF can be used only in projects started before January 1, 2018 and to purchase shares in the Russian Direct Fund investment (RDIF), and even in this case the government has to make a specific decision on the purchase up to a cap of RUB290bn ($5.1bn).
In addition, the fund's money can no longer be placed on deposit with Vnesheconombank (VEB). In the last years the government has deposited money into the accounts of the troubled development bank, which nearly went bust a few years ago. Currently RUB575.3bn have been placed on deposits in VEB.
By the same token the use of the NWF to buy bank subordinated bonds are excluded. In 2018, the finance ministry plans to place a deposit of up to RUB200bn rubles in VEB directly from the federal budget, not from the NWF.
In early 2018, the Ministry of Finance accumulated about RUB4.5 trillion in state reserves, or about 5% of GDP, 1.5% of which is invested in infrastructure projects and the rest is held as cash or equivalent.